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POLAND: PiS' New Five: Income tax relief

On Monday, Finance Minister Teresa Czerwińska presented proposals of changes to the personal income tax, which will allow for the introduction of one of PiS’ New Five election campaign promises. Persons under the age of 26 will be able to pay income tax at a 0% rate. However, this exemption will only apply to persons receiving remuneration on the basis of an employment contract. Consequently, those gaining income as a result of civil contracts or the self-employed, will not benefit from these changes. Furthermore, there will be an income cap on the tax relief – annually PLN 42 764 or monthly PLN 3563,67. In total, the Ministry’s proposal will provide young Poles with a maximum annual income tax relief of PLN 2986. The introduction of this new mechanism is planned for 1 October 2019 – eligible tax payers will have tax returned for the remainder of 2019. In 2020, the state treasury will collect tax accounting for the relief. Additionally, the Ministry has proposed to introduce greater tax exemptions and a third tax income threshold at PLN 42 764, which will enable taxpayers to pay a reduced rate of 17% instead of 18%.

Initially, PM Mateusz Morawiecki stated that the personal income tax exemption for persons under 26, will be introduced without any additional thresholds or criteria. Later, Morawiecki suggested that an income threshold may be introduced to reduce the risk of abuse. The proposed changes significantly differ from the initial announcement. The relief will certainly be welcomed by many young Poles – especially in smaller agglomerations where remunerations are lower. Although the Finance Ministry argues that the proposed solutions promote employment contracts, representatives of the opposition may use this as an example of the ruling party misleading voters.