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Tax changes and a new health insurance premium for entrepreneurs in the Polish Lada. Calculations

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Tax changes and the new health insurance contribution proposed in the Polish Lada mean an increase in taxes for millions of citizens – assessed the Lewiatan Confederation. The organization calculated the financial implications of the proposed changes for individual citizens. “Due to the Polish Deal, net wage losses start at PLN 12,800 gross” – believes prof. Adam Mariański, chairman of the National Council of Tax Advisors, BCC tax expert.

The Ministry of Finance announced on Monday that the draft tax act, which is part of the Polish Deal, is ready and will be consulted. According to the ministry’s plans, the legislative path regarding the planned changes is to be completed a few months before the end of the year.

Kościński on the effects of tax changes in the Polish OrderTVN24

Finance Minister Tadeusz Kościński indicated that tax changes would be beneficial or neutral for 90 percent of taxpayers, i.e. 23 million people. The most important changes include a proposal to increase the tax-free amount from PLN 8,000 to PLN 30,000, the tax threshold from PLN 85,528 to PLN 120,000 and changes in the health insurance premium.

Full-time job and relief for the middle class

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The project assumes three key changes for employees. Firstly, a higher tax free amount, secondly an increase in the tax threshold, and thirdly – this is an element of unfavorable changes for the employee – the elimination of the deduction of part of the health insurance contribution from tax. How will this affect your wallets?

– With income to 5.7 thous. zloty (gross monthly), the taxpayer gains by increasing the tax-free amount to PLN 30,000. Between 5.7 thous. and 11.1 thous. zloty the reform remains neutral for the employee thanks to the application of what is called a relief for the middle class, explained Deputy Finance Minister Jan Sarnowski on Monday.

– Between 11.1 thous. and 12.8 thous. zloty We are dealing with a profit resulting from raising the second threshold of progression to 120 thousand. PLN – he said.

According to the deputy minister, employees earning between 12.8 thous. and 15.5 thousand zloty will pay up to PLN 200 a month more tax.

– More than PLN 200 a month will be paid by those employees who earn over 15.5 thousand zloty monthly.

The issue of the relief for the middle class was referred to in Monday’s comment by prof. Adam Mariański, chairman of the National Council of Tax Advisors, BCC tax expert. As he wrote, the relief will only apply to people with income in the range of PLN 68,412 to PLN 133,692 per year, i.e. PLN 5,700-11,140 per month. “The purpose of introducing this relief is to artificially lower the income for a specific income range in order to compensate for the loss caused by the abolition of the deductibility of the health insurance contribution” – he explained.

As pointed out by prof. Mariański, “by the Polish Order, net wage losses start at PLN 12,800 gross and grow quite rapidly”. This means that above this amount – if the proposed solutions enter into force – we will earn less. The Lewiatan Confederation announced that, for example, a person earning PLN 13,000 gross per month will lose over PLN 350 per year.


Tax-free amount – retirees

As Deputy Finance Minister Jan Sarnowski said at the Monday press conference, those retirees who receive pensions of approx. 2,000 will benefit most from the increase in the tax-free amount. PLN – it will be PLN 170 per month. – People with a pension up to almost PLN 5,000 (according to the graphics presented at the conference – 4.9K PLN gross) will benefit from changes, while people with pensions up to PLN 13.6 thousand gross will pay less than PLN 200 per month – said the deputy head of the Ministry of Finance.

– Almost 90 percent of retirees will benefit from the changes we propose. There will be no change for 4 percent of retirees. About 6 percent will pay extra, but less than 200 zlotys, and 0.3 percent will pay more than 200 zlotys a month, summed up Sarnowski.

Polish Deal – own business

Speaking about the impact of the Polish Deal on entrepreneurs, he emphasized that it is difficult to estimate as precisely as in the case of retirees, because they may change the form of taxation. The Lewiatan Confederation presented its calculations.

According to the organization, “entrepreneurs running companies in the form of sole proprietorships will lose the most from the proposed changes”. As indicated, there are several hundred thousand production, trade and service companies.

The organization’s calculations show that the entrepreneur, taxed with a flat tax, which today pays PLN 190,000 from the tax base of PLN 1 million. PLN tax, after the change will have to pay 280 thousand. PLN (19% of tax and 9% of health insurance), i.e. by 90 thousand. more.

Polish Order – self-employed

According to Lewiatan, the Polish Deal will also hit the self-employed. “They conclude B2B contracts, are not bound by the labor code or exclusivity clauses. They are often sought-after specialists (managers, engineers, IT specialists, programmers) who carry out activities subject to general tax or flat tax” – explained.

Lewiatan’s calculations show that in their case, after the entry into force of the new regulations, the burdens will increase by almost 50 percent. As shown in the example, an engineer providing services under a B2B contract, subject to flat tax, earning income after deducting social security contributions (PLN 1,457.49) in the amount of PLN 15,000, currently pays PLN 2,850 in tax, after the changes it will be PLN 4,200. This means an increase of PLN 1,350 per month. The amount is PLN 16,200 per year.

Polish Order – lump sum

Moreover, changes were proposed in the payment of health insurance contributions for entrepreneurs paying a lump sum on registered income and a tax card. The Lewiatan Confederation stated that these are most often entrepreneurs conducting small service or craft activities (construction, taxi, hairdressing, cosmetic, carpentry, interior cleaning services, etc.).

“Due to the lack of the possibility of deducting health insurance contributions from the tax, their burden will also increase” – emphasized.

The organization gave the example of a carpenter taxed in the form of a lump sum on recorded income, who earned an income of PLN 7,000. “The lump sum (5.5%) calculated on this amount is PLN 385. Today, after deducting the health insurance contribution (PLN 328.78), the entrepreneur pays the tax office PLN 56 to the tax office. In total, his burden for the lump sum and health insurance is PLN 441 “- indicated.

After the changes – as shown by Lewiatan’s calculations – he will pay PLN 385 in lump sum (5.5%) and PLN 128.10 in health insurance (one third of the lump sum 1.83%). Therefore, it is about PLN 513.10 in total. As emphasized, the increase in tax and health insurance contributions will amount to 16.30 percent. It was reminded that in addition to the tax and health insurance contributions, the entrepreneur must also pay PLN 1,457.49 in social contributions.

Main photo source: Shutterstock

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