PIT income tax in 2023
Let’s start – paradoxically – with what has not changed. The tax-free amount, hiked to PLN 30,000 in 2022, has not been indexed despite a significant increase in inflation. Thus, despite the significant loss of purchasing power of money, we will remain with an unchanged free amount. Similarly, income tax is still 12% in the first threshold (PLN 120,000) and 32% in the second threshold. However, other changes will be felt in connection with the Polish Order in 2023.
More than a change in the form of taxation
If you are an entrepreneur and have decided in 2022 to settle with a flat tax or via a lump sum on registered income, you can still reverse your decision by May. The introduction of such a possibility is due to a change in the amount of income tax in the first tax bracket. The change only affected taxpayers using the general rules – so some flat or flat-rate taxpayers may have been disadvantaged.
How to account for 2022 income using the tax scale? All you have to do is file the correct PIT return by May 2, 2023. Instead of PIT-36L (for flat tax) or PIT-28 (for flat-rate taxpayers), file a PIT-36 return, appropriate for the general rules.
Extension of the deadline for filing PIT-28 returns
However, if you remain on the flat-rate income tax, remember that you have more time to file your tax return this year. You can file PIT-28 until May 2, 2023. (Previously, you had to make it in time before the end of February).
Change in income earned by minor children
Starting at the beginning of the year, we will stop counting income earned by minor children as parental income. This means that they will be covered by a separate tax-free amount. So if the minor’s income does not exceed PLN 30,000 per year, he will not have to pay tax – it will also reduce the parent’s income, making the parent pay less income tax.
Ineffective tax breaks
The increase in the tax-free amount to PLN 30,000 means that if a taxpayer has not exceeded the tax-free amount in 2022, he or she will not be able to take advantage of the reliefs he or she has enjoyed so far. This seems obvious – after all, without tax there is no way to… deduct tax – but we mention it for two reasons. First, to help avoid unpleasant surprises when filing your 2022 tax return. Second: because there is an exception to the rule, and that is the family tax credit.
A taxpayer is entitled to take advantage of the child tax credit even if he or she has not earned enough income to pay any income tax or pays less tax than he or she could deduct using the said credit. In such a situation, the taxpayer is entitled to receive the difference between the amount of the deduction to which he is entitled and the amount deducted in his tax return. However, a refund of the unused amount of the child tax credit must be claimed in the PIT return.
1.5% for public benefit organizations
In 2023, when filing our PIT for 2022, we will be able to donate not 1%, as before, but as much as 1.5% of our tax to charity.
New PIT-2 form
The PIT-2 form has been in place for many years, but on January 1, 2023, it changed significantly – this is also the aftermath of regulations introduced by the Polish Deal. From now on, the form will include statements and applications that are needed to determine the amount of monthly advances for personal income tax.
In the PIT-2 form, we now have the option to take advantage of the tax-free amount with more than one employer (£300 of relief with one employer, £150 of relief with two and £100 of relief with three employers). We will also mark in it whether we settle with a spouse and whether we benefit from increased employee deductible expenses. The form also includes a space to indicate whether you are taking advantage of discounts: for families of 4+, for return or for seniors.
An important note is undoubtedly the fact that the PIT-2 can be filed at any time of the year, and can be withdrawn at any time. Starting in January, the form can be submitted not only by full-time employees, but also by employees on contract, contract-to-work, board members and contracted executives.
Changes in CIT
Minimum tax for legal entities
Legal entities will not be spared from the regulatory modifications either. The Polish government has been working on the introduction of a minimum CIT for a long time, but a number of factors have caused its entry into force to be postponed – although it was supposed to take effect as early as 2023, the deadline has been postponed until early 2024.
In the course of the work on the minimum tax, the government also set a higher profitability rate at which the tax is to operate (it was raised from 1% to 2%). Moreover, some entities will not be subject to the tax – this group includes, among others: small CIT taxpayers, municipal companies, or companies earning income from the provision of health services.
Estonian CIT – changes
In this case, there are only amendments to make the regulations easier to interpret – these include. o expenses for employees’ personal cars used in a mixed manner. As of 2023, the CIT Law reads that only expenses and depreciation allowances for permanent impairment related to the use of passenger cars, means of air transportation, rolling stock and other assets are included in business expenses – in full if the assets are used exclusively for business purposes, and at 50% if the assets are used in a mixed mode.
Other changes relate to the issue of expiration of the tax liability for preliminary adjustments – under the new regulations, the liability expires in full after the end of one full accounting period on the Estonian CIT. This period equals four fiscal years.
Withholding tax (WHT)
Other changes concern withholding tax (WHT). What should you pay attention to?
First: the scope of the non-resident taxpayer’s exemption from income tax will be expanded. Treasury bonds and treasury bills will be tax-free.
Second: the application of certain withholding tax obligations on interest and discount on treasury bills and bonds will be excluded.
Third: In 2023, taxpayers will benefit from an extension of the term of the WH-OSC and WH-OSP payer’s statement – previously it was two months, but now it will be in effect until the end of the tax year in which it was filed.
Higher Social Security contributions
Another year has brought further increases in social security contributions. In 2023, the components of the transfer that each entrepreneur will have to make to the Social Security Administration are:
- pension contribution – PLN 812.23
- disability contribution – PLN 332.88
- sickness contribution – PLN 101.94 (this is a voluntary contribution)
- accident contribution – PLN 69.49
- contribution to the Labor Fund – PLN 101.94
Social Security contributions in 2023. The total amounts to PLN 1316.54, and if we decide to also pay the sickness contribution, it will rise to PLN 1418.48.
Of course, to the Social Security contributions must be added the health contribution, which from 2022 is 9% of the taxpayer’s monthly income for the tax scale. If the taxpayer earns the national minimum (PLN 3490), the health contribution will be PLN 314.10. For a taxpayer earning PLN 10,000, it will already be PLN 900.
Taxpayers using the lump sum will pay:
- 9% on the amount of 60% of the average salary, if their income amounted to a maximum of PLN 60,000;
- 9% on the amount of 100% of the average salary, if their income was from PLN 60,000 to PLN 300,000;
- 9% on the amount of 180% of the average salary, if their income amounted to more than PLN 300,000;
Flat tax payers will pay:
- 9% of the amount of 100% of the minimum wage (PLN 3,490), if their monthly income is a maximum of PLN 6,612;
- 4.9% of the company’s income if it exceeds PLN 6,612 per month.
Taxpayers using the tax card will pay:
- 9% of the amount of 100% of the minimum wage, or PLN 314.10.
New rates on tax card
In 2023, tax card taxpayers will face the biggest adjustment in years – the tax rate will increase by as much as 13.3%! For comparison: in 2019 there was an increase of approx. 1.7%, in 2020 by 2.1%, in 2021 by 3.6%, and in 2022 by 4.2%. Although the upward trend was noticeable, it was difficult to expect such a large jump – even taking into account the increase in consumer prices.
Read more about income tax rates in our guide: Forms of taxation in Poland!
VAT changes
SLIM VAT 3
The package of changes effective January 1, 2023 introduces, among other things, a modification in the definition of a small VAT taxpayer – from now on, the turnover limit increases (from EUR 1,200,000 to EUR 2,000,000, or PLN 9,564,000).
Another change intended to make life easier for entrepreneurs is the one according to which online and virtual cash register owners no longer need to print fiscal reports and other documents issued through them.
The changes will also affect binding information: rate information (WIS), excise information (WIA), tariff information (BTI) and origin information (WIP). To date, each is issued by a different authority – starting in April 2023. All of them will be issued by the director of the National Tax Information.
A very important change in the SLIM VAT 3 package is the implementation of the provisions of the provision of the ruling of the EU State Court – according to its content, taxpayers who have made a mistake in accounting for VAT will not be treated in the same way as tax fraudsters. What appears to be a cosmetic change (tax sanctions until now were 30%, 20% or 15% – after the change they will be up to 30%, up to 20% and up to 15%, respectively). will, in fact, allow courts to apply the maximum amount of sanctions when they find actual tax fraud. In the event of a mistake, it will be possible to rule in favor of the taxpayer and adjust the amount of sanctions according to the severity of the offense.
The end of the Anti-Inflation Shield
January 1, 2023. is also the date of the end of the Anti-Inflation Shield. VAT rates on gas, fuel, heat and electricity have returned to 23%. The differences will be significant:
- For fuel, VAT increased from 8% to 23%;
- For natural gas – from 0% to 23%;
- For electricity – from 5% to 23%;
- For system heat – from 5% to 23%.
However, we will still benefit from 0% VAT on food – at least until July 2023.
However, the government has announced new measures to help curb the effects of inflation – the talk is of setting maximum prices for electricity and gas, as well as launching an electricity and gas supplement, etc. However, it is assumed that the effectiveness of these solutions will be noticeably less than in 2022.
Accounting for private rental income
Those who derive income from renting premises will only be able to account for this income as a lump sum. This means that those who used the tax scale and accounted for, for example, depreciation or renovation costs as deductible expenses, will not be able to do so.
As of January, one of two flat rates of 8.5% or 12.5% will apply:
- 8.5% tax will be paid by those whose rental income during the year reaches a maximum of PLN 100,000;
- 12.5% tax will be paid by those whose private rental income exceeds PLN 100,00 per year.
Deferred cash payment limits
The government continues to reduce the incidence of cash payments in business-to-business transactions. There are plans to lower the limit from PLN 15,000 to PLN 8,000 and to introduce a limit for payments between a non-business individual and an entrepreneur (to be PLN 20,000).
The change will come into effect later than expected – it has been postponed until January 1, 2024. Check out what will change in cash transaction limits!
Increases in other fees and taxes
In addition to those mentioned above, increases await us in 2023:
- RTV subscription (we will pay PLN 1.2 per month more for a radio and PLN 2.8 per month more for a TV);
- power fee (from PLN 2.38 to PLN 13.35 net for households and smaller customers; PLN 0.1024 per kWh for other customers);
- Tax on land, buildings or parts thereof, and structures;
- dog ownership tax (this is the maximum fee – in 2023 it will be PLN 150.93 per year – however, the decision to impose a dog tax is at the discretion of local governments);
- spa fee – as in the above case, it will not be mandatory, but spas will be able to impose a higher rate – up to 60 gr per day of stay (until the end of 2022 it was 30 gr);
- Sugar tax – starting July 2023. products containing sugar will be charged an additional PLN 3 per liter or kilogram of the product;
- Alcohol excise taxes (planned increase of 5%);
- Excise taxes on tobacco products (planned increase of 10%)
Tax changes in 2023 – summary
These are all the changes that 2023 will bring in terms of taxes. Although there is a lot of it, paradoxically there are fewer tax modifications than last year, and most of them are still the effects of the introduction of the Polish Order. However, there is no doubt that in terms of the burden on the wallet of both the consumer and the businessman, this year will be a record year.
If you are an entrepreneur and wondering how to deal with your growing tax liabilities, check out PragmaGO’s tax financing service. With tax financing, you can defer payment of current PIT, CIT, VAT or Social Security taxes.
We will come back to this summary and update it on a regular basis – still not all the cards for this year have been revealed, and changes that have been postponed until April or July may be extended for another month.
