Zero Personal Income Tax Coming in August

Polish government officials announced their plans to introduce zero percent personal income tax a few months ago, and it appears the promise is slowly becoming a reality. This week, the Government Legislation Centre published a draft version of the bill amending the income tax legislation accordingly.

However, the new provisions will not apply to all taxpayers. Zero tax rate will only be used in case of individuals who are no older than 26 and earn revenue from service relationships, employment relationships, cooperative work relationships, home-based work and contracts of mandate.

What is Important in Income Tax:

Moreover, the government decided to introduce a threshold above which income will be taxed according to the regular fiscal scale. The limit is 85 528 PLN a year. An important thing to note is that the zero rate will not apply to revenue subject to lump sum tax.

The Ministry of Finance wants the new PIT rate to be effective starting from August 2019.  Marian Banaś, who chairs the government department, said that the goal of the new provisions is to provide a stimulus for young people to seek legal employment, stay in the country and give the Polish economy a boost. It was decided that the limitation embedded in the new fiscal provisions would be equal to the first income tax threshold. This means that next year a person earning a minimum salary (2250 PLN) will save approximately 133 PLN a month.

It is estimated the new PIT rate will cost approximately 476 million PLN in the first year and 1.3 billion PLN in the following years. In Poland, there are currently 2 million people who are under 26 and are employed. They will be able to submit a statement about tax exemption to their employers so that the company they work for does not make monthly advanced income tax payments. If they don’t submit the statement, the payments will be refunded to them after the end of the year.

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.