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Polish order and pensions. Calculations [tabelka]. Tax changes – who will lose, who will gain and how much?

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The Polish Order will affect the amount of benefits received by old age and disability pensioners. The government assures that the tax changes that will apply from January 2022 will benefit the vast majority of them – several million recipients. In turn, about 600,000 people will have smaller “on hand” payments – these are the calculations of the Pension Institute. Who and how much will the pension increase? Who will lose on the Polish Lada? Below are the most important changes retirees should be aware of and the implications for their wallets.

1. Polish Order: part of pensions without PIT, but health insurance premium of 9 percent.

Thanks to the lift tax-free amount up to 30,000 zloty from next year, all pensions up to PLN 2,500 gross per month will be exempt from income tax. No income tax advances will be deducted from such benefits. From pensions it will be the full health insurance premium of 9% is deducted. – non-deductible from tax.

What does this mean in practice? Changes in the health insurance premium will partially limit the positive effect of the increase in the tax-free amount. According to the earlier calculations of the Pension Institute, the profit is PLN 100-200 lower than in the situation when only the free amount is increased.

Also read: Polish Order and a revolution for millions of employees. Here are the most important changes

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2. Middle class relief not for retirees

An important element, which in the case of some higher earners, mitigates the effects of changes in the health insurance premium, is the so-called middle class relief. However, it will only be available to employees working under a contract of employment and entrepreneurs who pay for the tax scale with income ranging from PLN 68,412 to PLN 133,692.

The Sejm rejected the Senate’s amendment, thanks to which the relief was also to extend to retirees.


3. Polish order and pensions – calculations

So how will the Polish Order affect the amount of the net pension, i.e. the hand? – A pensioner with a gross benefit of PLN 2,500 receives PLN 2,088. Thanks to the changes, his payroll benefit will increase to PLN 2,275, as he will not pay the tax of PLN 187 per month. It is 2244 zlotys a year – explained recently ZUS spokesman Paweł Żebrowski.

With a retirement pension of PLN 3,500 gross per month (PLN 42,000 per year), the pensioner’s portfolio is to be PLN 1,320 more per year (PLN 110 more per month).

– 90 percent of retirees and disability pensioners will benefit from this solution. That’s over 8 million people – said for PAP in mid-November the minister of family and social policy, Marlena Maląg.

The calculations of the Pension Institute show that the tax changes introduced as part of the Polish Order they will lose retirees, the benefit of which is 5,000 PLN gross or more.

In the case of pensions in the amount of 5 thousand. PLN gross (PLN 4131 net), the loss will amount to PLN 6 per month, i.e. a total of PLN 72 during the year. However, in the case of pensioners with benefits at the level of 7.5 thousand. PLN gross (PLN 6178 net), the monthly loss will amount to PLN 203, i.e. almost 2.5 thousand. PLN during the year.

Pensions and the Polish OrderPension Institute

As reported by the Pension Institute, citing ZUS data, in Poland in March 2021 a benefit of more than 5,000. PLN gross monthly was collected by approximately 1 in 10 retirees (9.7%).

– Retirees receiving today – at the end of 2021, and before the March valorization – four thousand zlotys net (five thousand zlotys gross) or more will lose on the Polish Lada. And there may be more such people in the next year due to very high rates valorization, which will be granted in March 2022 – Oskar Sobolewski from the Pension Institute comments for TVN24 Biznes.

He adds that “there are also doubts about the constitutionality of such a change, whether the pension may be reduced as a result of tax changes”. – In fact in the Polish Lada, it will lose almost 10 percent of retirees, or about 600,000. These are people with higher benefits, who do not constitute a significant force in the PiS electorate and therefore the rulers have not decided to grant them the allowance that is due to the middle class – believes the IE expert.

Pensions and the Polish Order – how many people will they lose?Pension Institute

4. PIT-0 for seniors – working retirees

An important change for people who achieve retirement age (60 for women and 65 for men) is the so-called PIT-0 for seniors.

Seniors employed full-time, working on orders and entrepreneurs (on a tax scale, flat tax and lump sum) who despite reaching the pension entitlement, they will withdraw from receiving it and will continue to be professionally active, will be able to take advantage of additional tax relief.

Working seniors who do not receive a retirement pension will pay the tax only after their earnings exceed PLN 115,528 (PLN 30,000 of the free amount + PLN 85,528 of relief). Now there are 142,000 such people. The Ministry of Finance calculated that in 2022 they will save about PLN 500 million on tax.

– PiS won the elections, among other things, thanks to lowering the retirement age. It was not a good change and in my opinion it would be better if the retirement age in Poland was equal and increased to 67 years. Anyway, the rulers themselves do awarded on the occasion of the National Reconstruction Plan – states Sobolewski. Meanwhile – as he notes – the PIT-0-style incentive for working people of retirement age is to encourage seniors to work longer.

– Instead of resigning from the pension and not paying the tax in such a case, in the current wording of the regulations it will be better for pensioners to collect their pension and pay taxes on additional work. In my opinion, the retirement age in Poland is too low, and as a result of the pandemic, the average life expectancy will be even lower in the following GUS tables and it will not be possible for (on average) retirees to increase their pensions by as much as they are not drawn, so that this loss will be recovered. It will be possible only in the case of people who will live much longer than the average life expectancy in Poland – convinces the IE expert.

5. Drug relief

Drug relief is part of the rehabilitation relief. Thanks to it, you can tax-deductible expenses for drugs. Only people with the status of a disabled person and their guardians can use it. In addition, the purchased drugs must only be obtained by prescription. Height drug relief it is not limited, but it can only be used for drug expenses exceeding PLN 100 in a given month.

What will change in the regulations on rehabilitation relief? – Retirees and pensioners with an income of up to PLN 2,500 per month will not pay tax from 2022. Therefore, the rehabilitation relief, including the relief for drugs, will cease to be of practical importance to them, because they will not have anything to deduct from this allowance – says Sylwia Kulczycka, tax advisor, partner at ALTO Tax in an interview with TVN24 Biznes.

He adds that “the government indicated that the new regulations on rehabilitation allowance extend its application” and “it is a move towards retirees and disability pensioners”, but “under the circumstances, for the vast majority of retirees and pensioners this move will not have any practical significance”.

– If the government would strive to minimize the impact of drug costs on the budgets of pensioners, it would be worth considering increasing the level of drug reimbursement. Something that would affect the budgets of seniors not through a tax return, but on a daily basis – he emphasizes.

Kulczycka also explains that retirees and pensioners with an income exceeding PLN 2,500 a month will still be able to benefit from rehabilitation relief. – Its extension will be all the more important as they were not included in the relief for the middle class – he emphasizes.

Average retirement pension in Poland

Benefit of up to PLN 2,500 per month is collected by: 3.7 million pensioners (i.e. 62% of the total) and 1.4 million pensioners (i.e. 75% of the total).

The average pension paid by ZUS in March 2021 (after indexation) was PLN 2,544.54 gross. Its amount varies considerably depending on gender – the average benefit for men is PLN 3184.20, and for women – PLN 2,127.81.

The amount of pensions in PolandPAP / Maciej Zieliński

Author:Krzysztof Krzykowski

Main photo source: Shutterstock

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