The most popular solution among taxpayers is taxation of earned amounts on the basis of the so-called tax scale. Although the tax thresholds remain unchanged in 2019, citizens can pay a lower amount of taxes as a result of increasing the tax-free amount.
The tax threshold: what is it and how much is it in 2019?
The tax threshold is the amount that the taxpayer should know when making a settlement with the tax office. It is established at the state level and is divided into two basic groups:
- The first tax threshold is 18%;
- The second tax threshold of 2019 is 32% (it applies only to those taxpayers whose earnings during the year exceeded PLN 85 528 and include only the amount that exceeds this limit.
An example of taxing a person on general terms who earned PLN 150,000 a year.
In this case, the tax amount will be settled on such rules:
- Income in the amount of PLN 85 528 will be taxed on the basis of the first tax threshold, thus:
PLN 85 528 * 18 % = PLN 15 395.04
- The surplus of income in a given case is PLN 64 472 (PLN 150,000 – PLN 85 528).
- Excess tax will be calculated on the basis of the following formula:
PLN 64,472 * 32% = PLN 20,631.04
- In the analyzed case, the total tax amount will therefore amount to PLN 36026.08
PLN 15 395.04 + PLN 20,311.04 = PLN 360,268
As evidenced by the calculations presented above: for taxpayers whose wages exceed the amount of PLN 85,528 applied in Poland, taxation based on the tax scale can not be considered beneficial. An alternative solution in this case may be the transition to taxation on the basis of flat tax 2019.
What is a tax-free amount?
The tax-free amount, also known as the amount of tax-free income, is a monetary amount that does not require you to pay income tax. Such amount is one of the important elements of the tax system, and its legal basis is primarily the Act of July 26, 1991 on personal income tax.
Every year, the Ministry of Finance verifies the amount exempt from tax, and from the moment of Poland’s accession to the European Union, some citizens also compare this amount with amounts established in other countries of the community. Nevertheless, this approach is wrong, if only because in many European countries the tax-free amount is reduced for people bringing up children, and in Poland when paying insurance premiums, the income tax due 2019 and income subject to taxation are also reduced.
Nevertheless, we will provide below a comparison of tax-reducing amounts in Poland and some EU countries.
What will the tax-free amount be in 2019?
The basis for tax collection in the form of a tax scale was determined by Article 27 of the Income Tax Act. According to Polish law, the 2019 tax scale has a two-stage shape and is applied on an equal basis to all citizens of the country.
|Amount of income||Tax rate||Calculation|
|Up to PLN 85 528||18%||Minus 100% of the amount that reduces tax|
|Over PLN 85 528||PLN 15394.04 + 32% of the surplus from PLN 85,528||Minus 100% of the amount that reduces tax|
As can be seen from the attached table, if the earnings of a given person do not exceed PLN 85,528, they are taxed at the rate of 18%. The sum of the tax is further reduced by the amount that reduces the tax, the value of which will be analyzed further. In the case of higher earnings, the tax will amount to 32% (it is calculated not on total earned money, but only on that amount which exceeds the limit in PLN 85 528).
Who has the right to pay a smaller tax in 2019?
The tax-free amount in Poland increases year by year, as evidenced by the chart below.
In 2019, the following situation will occur:
- A taxpayer whose earnings did not exceed PLN 8,000 will not pay tax;
- In the case of income in the range of PLN 8,000-13000, the tax-free amount will amount to PLN 8,000-3091 (settlements will be made on the basis of the principle of degression, so the tax-free amount will be the higher the smaller the income we will have;
- The tax-free amount of PLN 3091 is payable to persons whose income exceeds PLN 13,000 and, at the same time, does not exceed the limit of PLN 85,528;
- The smallest tax-free amount in the amount from PLN 3091 to PLN 1 is payable to people whose wages range from PLN 85 529 to PLN 127,000.
Accordingly, the tax-free amount is not payable to people who earn over PLN 127,000.
Amount reducing tax: how much will it be in 2019?
The legal basis for determining the amount that reduces the tax is the Personal Income Tax Act, which entered into force on July 26, 1991. According to the plans for 2019, the situation will look as follows:
- In the case of income not exceeding PLN 8,000 – PLN 1440;
- For persons who have earned an amount of PLN 8,000-13000, the amount reducing the tax is calculated on the basis of the following formula:
PLN 1440 – (PLN 883.98 × (basis for calculating the tax – PLN 8,000) – PLN 5,000)
- In the case of earnings between PLN 13,000 and PLN 85,528, the tax reduction amount is PLN 556.02;
- If the earnings range between PLN 85 528 and PLN 127 000, the tax reduction amount is calculated on the basis of the following formula:
556,02 × ((basis for calculating the tax – PLN 85 528) ÷ PLN 41 472)
Examples of calculating the tax-free amount
Example 1. In 2018, the employee jointly received 18.000 PLN gross income. The net amount in this case will amount to PLN 12,000 (we deduct the amounts of Social Security contributions and income and rehabilitation relief). Then the amount of tax will amount to PLN 1,717.18. It is worth adding that from the given amount you also have to deduct 7.75% – this is the amount that is charged to various types of deductions deducted from tax and health insurance. Example 2. The amount of earnings of a tax payer in 2018 amounted to PLN 50,000 gross. From this amount, we should deduct revenues, the amount of contributions collected in favor of ZUS and the amount of the so-called rehabilitation discount. As a result of making such settlements, we will see that the taxed amount is PLN 34,000.09. We round it up to PLN 34,000 and a tax will be calculated, which will amount to PLN 5563.98 (PLN 34,000 x 0.18 – PLN 556.02).
Making such calculations on an independent basis is quite a difficult task, as a result of which taxpayers increasingly use for this purpose calculators (including income tax calculator 2019), which automatically calculate the amount of tax in the automatic mode and allow in a few seconds to know what amount will be released from tax in 2019.
How is the tax-free amount settled?
According to the Polish legislation, when settling the tax-free amount, sources of income are not taken into account (only if they are taxed according to the tax scale for 2019). In addition, it is also granted to self-employed persons, and in the case of a combination of several forms of taxation, the tax-free amount can only be applied once.
Read also: How to calculate income tax?
Why not 3089 and 3091 PLN?
By settling the tax-free amount, we can come across an interesting situation. Namely, earning PLN 3089 and paying taxes at 18% rate, we should pay equally 556.02 PLN tax. Well, let’s settle:
3089 – 556.02 = 2532.98
2532.98 +556.02 = 3089.
Everything is correct!
Now let’s look at what the situation will look like when the earnings will amount to PLN 3091.
3091 – 556.02 = 2534.98
2532.98 + 556.02 = 3089.
Why will not the zero tax result appear in the second case? The whole thing is that when calculating the tax-free amount, the so-called rounding principle works, according to which the tax and tax base should be rounded up to full zlotys:
- At the amount of PLN 0.01 or less, rounding down to full zlotys takes place;
- At the amount of PLN 0.01 or more, rounding up to full zloty up.
Accordingly, if you receive an income of PLN 3091, you will not pay tax, although in reality it amounts to PLN 0.30.
Tax-free amount and its combination with other tax benefits
With the introduction of a new tax-free amount in 2019, taxpayers have not lost their right to use other tax concessions at the same time. They are various reliefs that can exist in various forms. The basic examples of this kind of relief are given in the table below.
|Type of relief||Max deduction||Deklarcje|
|ZUS contributions for a taxpayer or cooperating person||In the amount of contributions paid or collected in 2018||PIT-28, PIT-36, PIT-36L, PIT-37|
|Relief on the car||PLN 2,280||PIT-28, PIT-36, PIT-37|
|Church donations||6% of the income of the tax payer||PIT-28, PIT-36, PIT-37|
|Donations for social organizations||6% of the income of the tax payer||PIT-28, PIT-36, PIT-37|
|Blood donor||6% of the income of the tax payer||PIT-28, PIT-36, PIT-37|
|Internet||PLN 760||PIT-28, PIT-36, PIT-37|
|Relief for medicines||The cost of medicines minus PLN 100 per month||PIT-28, PIT-36, PIT-37|
|Relief for rehabilitation equipment||The amount of expenses incurred||PIT-28, PIT-36, PIT-37|
Tax-free amount if settled by spouses
The tax, if it is paid by the spouses, is determined from 50% of the amount of income obtained jointly by them. The amount of reliefs that each spouse is entitled to should be deducted from this amount.
So how do you act in the most logical way in situations where the husband / wife did not earn any amount during the year or when one of the people earning in the family settles on the basis of 32% taxation and the other 18%? Experts advise to then settle together: in this way, you will not only pay tax 2019 on the basis of a lower range of the tax scale, but also maximally reduce the common income by obtaining the right to use a high amount to reduce the tax.
There are also cases when it is not profitable to settle taxes together:
- When one of the members of the marriage did not earn more than PLN 8,000 during the accounting year;
- When profits of one of the members of the marriage range between 13001-85 528 PLN.
In the case of self-settlement in the described situation, the spouses pay a total of PLN 1 016.02 less tax (PLN 1440 and PLN 556.02 respectively).
At the same time, a joint settlement will result in a larger amount being paid, which can be verified on the basis of a specific example. When one spouse earns PLN 5,000 and the other PLN 40,000, their total income is PLN 45,000 or PLN 21,500 with equal distribution for each spouse. Correspondingly, the earnings of each of them go to the group in which the free tax amount is PLN 556.02, i.e. the group that earns over PLN 13,000. In the case of joint settlement, the tax-free amount will be PLN 1104.04 (PLN 556.02 + PLN 556.02), while a separate settlement allows to increase this amount, namely it will amount to PLN 556.02 + PLN1440 = PLN 1,066.02. Well, the size of the loss in the case of a joint settlement is PLN 883.98.
Summing up, it can be added that although it may seem that the tax-free amount is lower than in other European Union countries, in fact tax payers have quite good tax reductions of their income, because the amount reducing tax in Poland is usually combined with other types relief.
The more different discounts we use, the lower the amount of our earnings and the greater the tax reduction amount. Accordingly, the lower will be the income tax, which we will have to pay.