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Amendment of the regulations on the tax scale and tax free amount

2016-12-29

The new year will see the amendment of the provisions of the PIT Act regarding the tax decreasing amount, i.e. the amount determining the level of income on which no tax will have to be paid by a taxpayer.

According to the provisions applicable to date, all taxpayers are eligible for the same tax free amount of ca. PLN 3090. This amount is not stipulated directly by the statutory provisions but follows from the tax scale and the so called tax decreasing amount included therein.

Pursuant to amended Article 27 of the PIT Act, the tax decreasing amount, to be deducted in the annual return, will depend on the income earned by a taxpayer as follows:

tabelka

So in practice for those taxpayers whose income on an annual basis will be higher than PLN 11,000 but will not exceed the threshold of PLN 85,528, the amended regulations will not change anything. The amendment will benefit persons whose annual income does not exceed PLN 11,000. A lower (or even zero) amount will be enjoyed by the remaining taxpayers earning the highest income.

As regards calculation of advances towards PIT, for taxpayers whose income will not exceed PLN 85,528, the tax decreasing amount will be equal to PLN 556.02 per annum. Whereas in the case of taxpayers whose income will exceed the threshold of PLN 85,528, advances will not be decreased.

If the entity obligated to calculate a monthly advance towards PIT is to be a withholding agent, in the case of taxpayers whose income does not exceed PLN 85,528, it will be able to decrease the advance by 1/12 of the tax decreasing amount (PLN 46.33 per month). After the threshold has been exceeded, a withholding agent will collect advances towards PIT without taking the tax decreasing amount into account.

As in the legal regime applicable by 31 December 2016, an employee will have to submit a relevant declaration to the employer so that the latter could take the tax decreasing amount into account. A novelty will be the possibility for an employee to submit a declaration that his/her income in the year concerned will exceed PLN 85,528. In such case, during a year the withholding agent will calculate due advances towards tax without taking at all the tax decreasing amount into account.

In consequence of the implemented amendments, in the case of taxpayers eligible after the amendments for the tax free amount higher than the current maximum PLN 6,600, the annual return will show in principle the amount of tax to be returned. Whereas taxpayers earning income higher than PLN 127,000, if their monthly advances towards PIT were decreased by the tax decreasing amount, will be obligated on the basis of their annual return to give back to tax authorities the tax decreasing amounts taken previously into account. 

Of course after the amendments described above have entered into force, taxpayers will be still able to file an annual return jointly with their spouse. Joint settlement of the spouses will be beneficial if one of the spouses earns revenues taxed according to the second range of the tax scale and is not eligible for tax decreasing amount in the annual return, while the other spouse does not earn revenues at all or such revenues are low.

Legal grounds: Act of 29 November 2016 on the amendment of the Personal Income Tax Act, of the Corporate Income Tax Act and of the Act on the amendment of Tax Regulations and certain other Acts  (Dz.U.2016.1926)