PIT - the deadline approaches
Anna Szymańska is a tax senior manager at the Warsaw office of Ernst & Young.
As promised, in this week's conclusion to my exciting two-part tax reconciliation series, I will explain who can deduct how much and from what (income or tax). Hopefully, some or all of this may be of use to you when preparing or checking (if someone else has prepared it on your behalf) your annual reconciliation for 2002.
There are a few available deductions that all taxpayers can take against income whether they have limited or unlimited liability to domestic tax, such as donations to scientific, cultural, educational or sports organizations (up to 15% of income) or for charitable, environmental protection or religious purposes (up to 10% of income according to the PIT law, but separate provisions state that donations specifically for the charitable activities of the church could potentially be without limit subject to the individual receiving a receipt for the donation and the recipient providing a written report of how the donation was used within two years of the date of receipt. (This question is currently before the Supreme Administrative Court.)
But don't forget that the requirements changed in 2002, and in order to claim a deduction for a cash donation, the payment must be evidenced by a detailed bank transfer confirmation setting out to whom the payment was made and for what purpose. Gone, I'm afraid, are the days when it was sufficient to produce a written or printed receipt from the parish priest or schoolteacher. If you pay in cash rather than by bank transfer, you don't get the benefit of the deduction.
You also get to deduct statutory social insurance contributions, annual contributions to professional organizations where enrollment in such a professional organization is obligatory for the taxpayer and various rehabilitation costs if you are disabled or one or more of your dependants is disabled. (There are many others which have various individual limits.)
For those with unlimited tax liability, there are a few more available deductions against income:
- Mortgage (loan) interest (if the mortgage was entered into after Jan. 1, 2002 and if the investment, the subject of the mortgage, was completed in the same year) - the interest on a loan up to a maximum of
zł. 189,000
- Investment in residential housing started before 1997 - all costs incurred up to a maximum of zł. 189,000 (minus any costs already deducted in previous years)
If you have unlimited liability to tax, certain deductions against your tax liability are allowed for various things. With a few minor exceptions, all of these are expressed as a deduction of up to 19% of the amount spent, with a maximum limit to the total deduction.
The individual deductions for 2002 are:
- Professional qualifications/training -
zł. 433.20
- Higher education costs (with age limits) - zł. 760.00
- Children's (public transportation) travel costs if their school is away from their place of residence - 19% of costs
- Educational tools and materials, computer programs, professional publications, etc. - zł. 433.20
- Statutory health care contribution - 7.75% of your income
There are also some carry-forward deductions available for individuals with unlimited liability to domestic tax in relation to investments started prior to Jan. 1, 2002; for instance, the traditional and now historic building relief; that is, building from scratch or purchasing a new dwelling from an investor. Here you are able to subtract those deductions which you were not able to use in the period 1997-2001 (i.e., deductions greater than overall tax liability therefore carried forward) and 19% of costs up to a maximum limit of zł. 35,910 (reduced by deductions already claimed).
Additionally, saving money on a housing association account gets you a deduction of 30% of costs up to a maximum limit of
zł. 11,340. (This decreases the building relief amount).
And finally, renovation expenses which amount to 19% of costs up to a maximum limit of zł. 4,620 for a house or zł. 3,850 for a flat. (You have to have legal title to the property to claim either relief; that is, either direct legal ownership or a lease agreement for the appropriate period.) This is a three-year relief and relates to the period 2000-2002 inclusive. For those of you who have read the fine print relating to the hoops you have to jump through in order to qualify for mortgage interest relief, this is a useful alternative, particularly if you bought into a housing or tenants' association where traditionally you receive the title to the property and the keys at a point where you are left to your own devices to install flooring, tiling, lighting, etc. All these expenses classify as renovation relief.
Deductions cannot be taken against income taxed at the 20% flat rate. Additionally, joint returns can only be filed where both spouses have unlimited liability (or the taxpayer for a single parent filing with a minor).
The filing deadline is April 30, and, as with my editor with late submissions of articles, there are no extensions permitted under the law. This is no joking matter, although I have yet to see a tax-office worker refuse to accept a delayed payment of tax (with penalty interest, of course). Under the provisions of the Fiscal Penal Code, the tax office can fine you up to zł. 16,000 for failing to pay taxes due or zł. 19,200 for simply not filing your return on time, so get out those calculators and start counting.
I leave you with one final thought - the reward for saving your money is being able to pay your taxes without borrowing.
