PIT 0 in Poland for young people up to 26 years old

Over 2 million people in Poland will benefit from the income tax (PIT) relief introduced on August 1, 2019. This tax exemption is intended for young employees that are employed on the basis of employment and mandate contracts, who are under 26 years of age and have an annual income of not more than PLN 85,528. If this amount is exceeded, PIT will be charged only on the surplus and not on the total amount. This tax relief came into effect on August 1- so it is possible to earn PLN 35,616.67 from this date until the end of the year without incurring any tax charges. The relief applies regardless of the number of contracts and employers.

When was the new Income Tax Act signed?

Precisely on July 24, the President of the Republic of Poland signed the Act amending the Act on personal income tax, family benefits and health care benefits financed from public funds which provides PIT relief for people under 26 years of age. During the parliamentary work on this bill, Prime Minister Mateusz Morawiecki emphasized that young people need to be activated, and should be more willing to enter the labor market once they see the right perspectives for themselves. He also added that the opportunities of young people in Poland must correspond to those of their Western peers, and the abolition of income tax for young Poles will help significantly.

Real salary increases for young employees

Young people can start benefiting from the tax relief from August 1, as ;onga as the employer has submitted a special statement about being exempt from PIT. If this is not done, the tax refund will be granted together with the annual tax return for 2019. Such a statement will not be required after January 1, 2020, when the tax advance will no longer be collected. Zero PIT for young people will cause a clear increase in salaries for people under 26 years of age. According to the calculations of the Ministry of Finance, thanks to the relief, young employees can count on the following financial bonuses:

• based on a minimum salary of PLN 2,250 gross, there will be ann increase of PLN 133 per month and up to PLN 1,592 per year,
• based on an average salary of PLN 4,675, wages will increase by PLN 355 per month or PLN 4,261 per year,
• in the case of someone earning around the annual limit, i.e. roughly PLN 7,127 gross per month, the monthly relief will be PLN 564, and the annual relief will be as high as PLN 6,768.

How do the experts in Poland evaluate the idea of zero PIT for young people?

Tax and financial experts are divided on how to assess PIT relief for people under 26 years of age. They agree that it is generally beneficial to consider the needs of young employees who are forced into paying high prices for apartment rentals or making large loan repayments, while not usually having too many bargaining chips to use when trying to negotiate salary increases with their employers and that therefore, any increase in their salaries should be recognized as a positive initiative. The disadvantages of this solution are: a general reduction in local government revenues (PIT revenues are an important part of their budgets) and the exclusion of entrepreneurs and persons employed under specific contracts, who will be unable to benefit from such relief.

According to some specialists, failure to include persons employed on the basis of a mandate contract may be considered unconstitutional. Young entrepreneurs may also feel embittered, as they will probably start moving into full-time contractual employment, considering the ever-increasing costs of running their own business.

Will all income of young people be non-taxable?

The PIT tax relief for young people only covers salaries - some income such as that derived from scholarships, maintenance and allowances, compensation for wrongfull termination of employment or severance pay, will still be normally taxed. Furthermore the relief does not apply to ZUS and NFZ contributions.