Ministry Wants to Reduce Labour Costs

Teresa Czerwińska, Poland’s Minister of Finance, announced new government plans aiming to bring labour costs down. This is to be done by an array of changes to Personal Income Tax regulations. The ones who will benefit the most are young Poles and people with low to moderate income.

The changes will affect employees who are taxed on tax scale as well as entrepreneurs who operate as sole proprietorships and pay PIT tax instead of CIT tax. The basic Personal Income Tax rate will be lowered to 17 percent (down 1 percentage point). The rate applies to annual income not exceeding the amount of 42,764 PLN.

This change will be paired up with an increase in tax deductible expenses, which are subtracted from revenue to create income tax basis. The expenses amount (for those employed in a single workplace) is currently 1,335 PLN. The Ministry want to increase it to 3000 PLN. As a result, the taxable income will be lower and eventually the employee will receive a higher renumeration. Officials estimate that thanks to the new provisions, a person earning a minimum salary will receive 472 PLN more per year. For a person with average income, the amount will be 696 PLN.

This is not the end of good news for employees. The government is working on regulations that will eliminate Personal Income Tax for those who are no older than 26. Such workers, regardless of whether they have a contract with one or several employers, will be taxed at 0% rate on income not exceeding 42,764 PLN a year. Ministry experts estimate the tax relief will apply to 1.5 million people in Polish companies.

The lawmakers are working fast. The 0% PIT tax rate will come into effect as early as October 2019. Other changes – lowering of PIT rate and a hike in tax deductible expenses – are planned to be introduced in January 2020.

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.