Polish Deal 2022 – only taxpayers earning less than the national average will gain, self-employed individuals will be at a disadvantage | PRO HR June 2021


Although only assumptions of the Polish Deal are known, it may already be expected that only taxpayers earning less than the national average will gain from the introduction of the changes.

The Polish Deal assumes that the amount exempt from tax and tax threshold will increase (respectively to PLN 30,000 and PLN 120,000 annually), but at the same time the possibility of deducting health insurance contributions from PIT will disappear. 

This will cause particularly major losses for self-employed individuals working under B2B arrangements. An alternative, mitigating in some way these negative effects for people with “medium” income (up to PLN 10,000–11,000 monthly), may be a change from the linear tax of 19% to the tax scale. In such a situation, the self-employed individual will be able to take advantage of the tax exempt amount and lower (17%) tax rate in the first threshold. 

Self-employed taxpayers performing freelance work or providing certain types of services may also consider flat-rate taxation (17% or 15%). If the provisions regarding this form of performing business activity are not changed by the Polish Deal, health insurance contributions will not increase. Accordingly, the absence of the possibility of deducting them from tax will have lower negative effects on net income.
Employees whose monthly income exceeds the national average will also lose, although for the so-called “middle class” a relief is envisaged in order to offset this loss.

There will also be additional charges for contractors performing several contracted jobs. Their net income will decrease not only by the social security and health insurance contributions due on all agreements, but also due to the lack of possibility of deducting the latter from tax.

Persons who obtain income that is not at all subject to social security and health insurance contributions will be in a safe situation. Such income includes remuneration for management board members payable on the basis of a resolution or remuneration of commercial proxies. Such income may also include employee shares granted under an incentive program.

Persons with the lowest income are to gain, although the actual benefits in some cases may be lower than announced. 

Also persons working under specific work contracts will gain. These contracts are to remain to be exempt from contributions and, as a result of the increased amount exempt from tax and the first tax threshold, income tax on such contracts will decrease. 

However, details of the solutions and their exact effects for the income of employees and contractors are not yet known. Nor are the possibilities of mitigating these effects.

Find more in the PRO HR June 2021.