Lower Personal Income Tax rate (PIT) from 1 October 2019
On 1 October 2019, a new PIT tax rate for persons earning within the first tax band has entered into force. The tax-deductible costs have also been changed. Who and how much will benefit from the change?
PIT reduction – 17% in the first tax band
On 1 October 2019 an amendment to the Personal Income Tax Act has come into force. The personal income tax rate for the persons earning less than PLN 85 528 is currently 17% instead of the previous 18%.
However, it should be noted that in the current tax year the average annual PIT tax rate stands at 17,75%. This is because a new tax rate applies from October 1 to December 31, i.e. only for three months of 2019. Thus, taxpayers will take full advantage of the current PIT reduction in 2020.
Lower PIT – how much will taxpayers save?
Thanks to a lower rate of PIT tax, persons receiving average annual wage may save even PLN 700, while employees with the minimum wage may save almost PLN 500 annually. The new changes will be primarily advantageous for persons whose earnings do not exceed the amount of PLN 85 528 and fall into the first tax band. However, employees who earn more will also benefit from this reduction. This results from the fact that the tax scale is progressive, which means that the 32% tax rate applies only to earnings exceeding the first tax band.
Higher tax-deductible costs
The amendment to the Personal Income Tax Act has introduced not only the PIT tax reduction, but also the increase of tax-deductible costs. From 1 October to 31 December 2019, i.e. during the interim period, monthly tax-deductible costs amount to:
- PLN 250 for the revenues form a single employment relationship, employment relationship, co-operative employment relationship and outwork,
- PLN 300 in the situation when the place of permanent or temporary residence of the taxpayer is situated outside the place of work performance, and the taxpayer does not receive family separation allowance.
The same monthly rates will also apply from 1 January 2020. Moreover, according to the new regulations which will come into force on 1 January 2020 total base annual tax-deductible costs will amount to PLN 3000 and PLN 3600 for the taxpayers whose place of permanent or temporary residence is situated outside the place of work performance, and the taxpayer does not receive family separation allowance.
In case of the persons receiving income from more than one service relationship, employment relationship, co-operative employment relationship and outwork, the tax-deductible costs cannot exceed the amount of PLN 4500 for the given tax year.
On the other hand, for the taxpayers employed in many entities and simultaneously commuting to work outside the place of permanent or temporary residence and not receiving a family separation allowance, the total annual tax-deductible costs will not be higher than PLN 5400.
See also: New tax deductible costs rates