Higher Earnings Trigger Higher Tax Rates for Increasing Number of Poles

As Polish salaries continue to rise, a growing number of citizens find themselves moving into a higher tax bracket. Currently, individuals earning up to PLN 120,000 annually are taxed at a 12% rate. However, any income exceeding that threshold is taxed at 32%.

Piotr Juszczyk, chief tax advisor at InFakt, highlighted in a Business Insider interview the projected increase in taxpayers falling into this higher bracket. He anticipates the number of Poles paying 32% on their surplus income could double within the next four years. Juszczyk explained that this shift would categorize hundreds of thousands more Poles as “rich” under the current tax system, impacting their net income significantly.

For individuals, the key to avoiding the higher 32% tax rate lies in keeping annual gross earnings below PLN 11.87 thousand per month. Once this cap is exceeded, only the income above PLN 120,000 is subject to the higher tax. It’s important to clarify that the 32% rate does not apply retroactively to the initial PLN 120,000, which remains taxed at 12%.

Many employees get a stark reminder of this tax structure later in the year, often noticing a dip in their September or October paychecks when their income surpasses the higher tax threshold. This confusion frequently leads to inquiries to HR departments, although companies are not required to notify employees when they’ve crossed the threshold.

However, there are strategies to mitigate the impact of this higher tax rate. One such method is for an employee to file for joint taxation with a spouse, provided the spouse’s income does not exceed the first threshold, among other criteria like marriage and joint property.

In summary, anyone earning over PLN 12,000 per month should anticipate reaching the higher tax bracket as the year progresses, affecting their take-home pay once the income exceeds PLN 120,000.