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.

What This Means for Businesses in Poland

Tax policy changes in Poland have direct implications for both domestic and foreign-owned businesses. Companies operating in Poland must stay informed about regulatory developments to optimize their tax position and maintain compliance. The Polish tax system includes CIT (19% standard, 9% for small taxpayers), VAT (23% standard rate with reduced rates of 8% and 5%), and various sector-specific levies.

For international entrepreneurs and investors, understanding the Polish tax landscape is essential for business planning. Poland offers several attractive incentives including the Polish Investment Zone (up to 15 years of CIT exemption), R&D tax relief (up to 200% deduction), and the IP Box regime (5% effective CIT rate on qualified intellectual property income). Professional tax advisory can help identify the most beneficial structure for your specific situation.

The interplay between Polish domestic tax law and international tax treaties is particularly important for foreign-owned entities. Transfer pricing regulations, withholding tax provisions, and anti-avoidance rules (GAAR) require careful navigation to ensure both compliance and optimization.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our tax advisory services in Poland, or contact us for a free consultation.