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Tax Focus 2019 | Zero PIT – Tax relief for people under the age of 26

From the 1st August, 2019 an exemption from taxation of salaries of people under the age of 26 years of age was introduced. The rules of using zero PIT for young people are advantageous for those employed under a contract of employment, induction work and commission. Not all salaries and incomes will be covered by the exemption, and the free amount will depend on the gross remuneration.

This new act concerns the introduction of a zero PIT tax on income from work (employment relationship or co-operation employment relationship) and for contracts of mandate, for people up to 26 years of age – up to an amount not exceeding PLN 85,528.00 in a tax year (this corresponds to the upper limit of the first range of the tax scale). The Act does not apply to revenue from business activities or contracts for specific work.

Objectives of the Act

The main objective is to reduce the fiscal burden of young people who perform work on the basis of employment relationship, co-operative employment, service relationship, superimposed employment relationship or contracts of mandate concluded with employers. According to the legislator, the reduction of the burden will make it easier for young people to start work and will enable people working in the so-called ‘grey market’ to return to the labour market. The Act is expected to contribute to the improvement of the labour force participation rate of young people and to the decrease of unemployment among this age group.

Limits

The PIT exemption is to apply to income earned by persons up to 26 years of age up to the amount not exceeding PLN 85,528.00 in a given tax year. In accordance with the adopted regulations, the limit will apply regardless of the number of agreements concluded by the employee in a given year. The only thing to remember is that the revenue is subject to lump-sum income tax, the revenue is exempt from income tax and revenue on which, the pursuant to the provisions of the Tax Ordinance, the collection of tax has been abandoned.

From When?

From the 1st August, 2019 is came into force, with respect to revenues earned in 2019, the tax exemption limit is to be PLN 35,636.67.

In order to take advantage of the exemption, a person under the age of 26 will have to submit an appropriate tax remitter, so that the remitter, while paying remuneration, does not collect advance payments for income tax. This year such a statement will apply to salaries paid for the period from August to December 2019. If such a statement is not made and the remitter collects PIT advances, then in the annual PIT settlement for 2019 the advances collected will be refunded.

We will be keeping track of the legislative work and keep you informed of any changes in this respect.

If you have any further questions, please do not hesitate to contact us.

The information contained above is of a general nature and does not concern the situation of a specific company. Due to the speed of changes occurring in Polish legislation, we kindly ask you to determine, on the date of this information, whether it is still up to date.

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