[Poland] Polish Order: Health contribution according to the taxation form

From January 2022 the health contribution rate will vary considerably and it will no longer be tax-deductible. These changes may be severe for some, while for others the contribution rate may be reduced to zero due to a loophole in the legislation.

On 29 October 2021 the Sejm adopted a package of tax acts of the Polish Order. The legislation includes solutions changing the existing rules for calculating the health contribution and deducting it from income. The rate of the contribution will not be the same for everyone. Some taxpayers will strongly feel its burden, while some may be covered by a zero rate. The deadlines for payment of the contribution will also be altered.

Uniform 9% health contribution for employment contracts and mandate contracts

According to the new regulations, as from January 2022, persons employed on the basis of an employment contract or a contract of mandate will be subject to a unified linear health contribution rate of 9 per cent, calculated on the basis of income, with no possibility to deduct the contribution from tax. In addition, some taxpayers will be able to take advantage of the so-called middle class relief (this relief will not cover contractors and pensioners).

The middle class relief is to apply to employees working on the basis of a professional relationship, employment relationship, employment contract or co-operative employment relationship, as well as sole traders taxed on the basis of the tax scale and whose annual income ranges between PLN 68 412 and 133 692 (PLN 5 700 – 11 140 per month).

Health contribution for the lump-sum or flat-rate tax settlement

Once the Polish Order comes into force, the health contribution will not be deductible on general rules. For persons with a flat tax, the health contribution will amount to 4.9 per cent and it will be calculated on the basis of the entrepreneur’s income. Lack of the possibility to deduct the contribution plus lack of the possibility to benefit from the tax-free amount, which from 2022 will be raised from the current PLN 8 thousand to PLN 30 thousand, will mean an increase in the entrepreneur’s burden (a 9% health contribution rate will be added to the current 19% income tax without the possibility to deduct the contribution from tax, so the new tax rate will increase to 28%).

Taxpayers with lump-sum taxation will pay a health contribution according to their annual income and will not be able to deduct it from their taxes either.

For the registered lump sum, the amount of the health contribution is 9% calculated on the basis of the calculation base:

• with annual income up to PLN 60 000 – 60 per cent of the average remuneration,
• with annual income up to PLN 300 000 – 100 per cent of the average remuneration,
• with annual income exceeding PLN 300 000 – 180 percent of the average remuneration.

Zero health contribution – for whom?

However, after the changes brought about by the entry into force of the Polish Order, some taxpayers will not pay the health contribution, and this is due to a loophole in the proposed legislation. This situation will concern:

• parents of at least four children with an income up to PLN 85 528,
• older persons who resign from receiving an old-age pension,
• persons returning from abroad.

This group of taxpayers will not pay income tax and will also be subject to a zero health contribution.

The situation looks different for persons under 26 years of age covered by the so-called zero PIT. These persons will pay a health contribution reduced to the level of the hypothetical PIT advance payment due if they were not exempt from tax.

Health contribution – new payment deadlines

From the new year, the Polish Order will not only introduce a significant differentiation of the health contribution and difficulties with its calculation, but will also change the existing deadlines for payment of the contributions. From 1 January 2022, the health contribution will be payable (and calculated on the basis of income) by the 20th day of a given month (until now, contributions were paid by the 10th day of the month for entrepreneurs who do not employ staff). The health contribution for February, for example, will be due by 20 March calculated from the January income.

Learn more: Changes to benefits from January 2022

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