On 16 November 2021, the Polish president signed a package of amendments to tax laws so-called "Polish Deal". From individual taxation and net compensation perspective, there are few major changes which will impact Polish labor market, especially net compensations of many Polish employees, regardless the type of “employment” contract the have (regular employments, civil contracts etc.).
In reference to employees employed on the basis of regular employment contracts, the most critical personal income (PIT) related changes could be summarize as follows:
1. Abolition of the right to deduct health insurance contributions from PIT - starting from the new year, the tax deduction for health insurance contributions (9%) would end,
2. Increasing the tax-free allowance and the second tax threshold - the tax-free allowance would increase from PLN 3,091 to PLN 30,000. Moreover, the first tax threshold will be increased to PLN 120,000 (from PLN 85,000), beyond which the higher PIT rate of 32% will apply.
Regardless the fact, that the personal income tax rates would remain unchanged (17% and 32%), due to new health care relief mechanism, the new rules would have a negative impact on net salaries of high paid employees (PLN 150,000 and above).
However, other tax changes would have a positive impact on some employees, e.g.:
1. Extending the range of the Personal Income Tax exemptions, e.g. PIT exemptions will cover the income of a taxpayer who had parental authority of at least 4 children, as well as the pensioners’ income if decide to remain professionally active,
2. Tax relief for the middle class – special tax relief will be introduced, with the purpose to offset the health insurance contribution changes. This relief will be available to employees with annual compensations between PLN 68,412 and PLN 133,692,
3. Tax relief for single parents – the new provisions replace the existing rules (the right to tax together with the child) with a possibility to deduct PLN 1,500 from tax.