Magazine
22:04 12 January 2022
Post by: Warsaw Business Journal

THE DEAL IS IN THE DETAIL

An IFR expert and attorney-at-law breaks down the Polish Deal. BY KAROLINA KLIMEK

THE DEAL IS IN THE DETAIL

There are many changes brought about by the Polish Deal. Although most people talk about tax changes, they also affect other areas of life. Some of the anticipated changes are, in fact, not the solo projects that the Polish government wants to implement. President Andrzej Duda signed the bill on November 16 and it is scheduled to enter into force on January 1, 2022, with some solutions to come into effect later. According to the government's announcements, despite the comprehensiveness of the deal's assumptions, it is essentially based on a few key projects.


STANDARD DEDUCTION UP

One of them is increasing the tax-free amount to PLN 30,000. In practice, according to the government, the change will mean lower taxes for people with low and average incomes. The changes will also be beneficial for families, as married couples settling their accounts jointly will be able to take advantage of the tax-free amount of PLN 60,000 which will particularly affect married couples with a wide range of incomes.

Another project, also in the tax sphere, is a reform that assumes that no income tax will be paid on pensions and disability benefits of up to PLN 2,500 per month. In practice, this solution is expected to save pensioners an amount equal to the income tax and increase the benefits they receive. In the case of pensioners receiving higher benefits, income tax is to be paid on the amount exceeding PLN 2,500.


NO LIMITS

The abolition of limits to specialist doctors is another project that is expected to benefit Poles, as the ubiquitous queues to specialists, which have increased significantly with the advent of the coronavirus, is one of the main problems of healthcare in Poland. The project assumes the abolition of all limits on financing by the National Health Fund (NFZ). Until now, appointments to the most-needed specialists, due to the lack of funds provided by the NFZ ended very early. Now, Warsaw has announced that there will be as many appointments and visits as there is demand for them and will guarantee payment for each service provided to all medical facilities.

Another flagship project also concerns the health of Poles. It is a long-term project. The lawmakers want to increase spending on health to 7% of the GDP over the next six years. In 2023, it is expected to reach 6% of the GDP. The project assumes allocating funds not only for the already mentioned medical services but also for the modernization of medical infrastructure, digitalization of healthcare, and increasing salaries of medical staff.


GALLOPING INFLATION

Recent time in the era of the pandemic has shown how unstable the real estate market is in Poland (and the world). Prices in both the secondary and primary markets have increased significantly, while the recent galloping inflation has caused the cost of credit to rise as well. A program called “Apartment Without Own Contribution” was created. The program is intended to increase the availability of financing for own apartment for Poles. The solution is to apply to people who want to buy an apartment from the primary or secondary market, as well as those who want to build their own homes. The Polish government, through (bank) BGK, is to guarantee an own contribution of up to 20% — up to PLN 100,000 for a minimum period of 15 years. BGK is also to assist in the repayment of a portion of the guaranteed housing loan. This will be the so-called family repayment, which will amount to PLN 20,000 in case of the birth of the second child in the family and PLN 60,000 after the birth of the third and subsequent child. It is not difficult to calculate that in order to meet the basic criterion for participation in the project, the price of an apartment cannot exceed PLN 500,000, which means that people from smaller towns, where house prices are lower than in large cities, will benefit from it.

Another project, also in the real estate field, will facilitate the construction of a single-family house of up to 70 sqm. Everyone will be able to start the construction of a small single-family house, assuming responsibility for the management of the construction, without obtaining a building permit and without the obligation to appoint a construction manager and keep a construction log. Other projects of social character include the “Family Care Capital Program,” the creation of “Small Learning Centers” in Poland, provision by the state for higher subsidies for agricultural fuel and facilitation of direct sales by farmers, and the “Strategic Investment Program,” which is to provide new solutions and development funds to local governments.


INTERESTING CHANGES

However, the most interesting changes are the tax changes introduced by the deal. Apart from the increase of the tax-free amount for all working people who settle their income according to the progressive scale, the government is also introducing a higher tax threshold for people who settle according to the general rules (i.e. tax scale).

The first tax threshold will be increased from PLN 85,528 to PLN 120,000 which means that a 32% tax rate will apply only if income exceeds PLN 120,000. This solution will be beneficial for those who earn no more than PLN 120,000 per year, as they will not be subject to the higher tax threshold. The Polish government estimates that thanks to this solution, the number of people in the second tax bracket will decrease by half.

Another nod in the direction of the "middle class" is to be the introduction of a relief that will cover persons with gross annual earnings between PLN 68,412.00 and PLN 133,692. However, it will not include the earnings of contractors or members of the management board paid on the basis of an appointment to the body. The relief will cover persons employed on the basis of an employment contract and entrepreneurs running a business and settling their accounts on general principles. The introduced changes will also cover insurance issues, i.e. the possibility to deduct health insurance premiums from the tax will be eliminated for persons employed under employment contracts and for entrepreneurs settling their accounts in accordance with general principles. This solution will result in the fact that those who will be covered by this solution will pay higher taxes. Another change has been introduced with respect to health insurance premiums for, inter alia, members of management boards and proxies who were appointed to perform their functions under an appointment act. They will have to pay, similarly to persons employed under an employment contract, a health insurance premium in the amount of 9% of the basis for calculation of the premium. The premium will not be deducted from tax. Until now the persons affected by this change only had to pay income tax.

These are only some of the changes introduced by the Polish Deal, but from the perspective of many interested parties, they are among the most important. Specialists from various fields have been working on calculations of who will lose, who will gain, and how much. The real consequences of the changes introduced will be felt by Poles next year and each of them, depending on the extent to which they affect them, will be able to comment on the possible benefits or drawbacks.


Family Business Initiative Association (IFR) is a  Warsaw-based alliance that groups entrepreneurs who own family businesses, as well as experts and scientists who support this community. 

Karolina Klimek is an IFR expert and legal counsel  at Brillaw Kancelaria Radców Prawnych Mikulski & Partners.


ifr
polish deal
karolina klimek

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