You can minimize the tax losses associated with the Polish Deal

Since the announcement of the Polish Deal, it has been causing concern among entrepreneurs whose pockets will suffer the most. According to Teresa Warska, an expert on tax law at Systim.pl, there are ways to minimize possible financial burdens.

It cannot be denied that those entrepreneurs who settle PIT linearly will lose the most. Why? All because of the new rules for settling health insurance contributions and the inability to settle the tax-free amount. Firstly, the amount of the health insurance contribution will be calculated from the income, and secondly – it will not be possible to deduct part of it from the tax.

"An increasing number of entrepreneurs are considering the transfer of tax residence. At first glance, such cost optimization may seem like an interesting solution. In the Czech Republic, running a one-man business is not complicated, but reaching for such a variant is de facto associated with the necessity to move to another country," Teresa Warska, noticed.

After introducing the modifications proposed under the New Deal, self-employment will cease to be a beneficial form of business for many people.

"The proposed changes include the elimination of the possibility of deducting health insurance from tax and the necessity to pay health insurance contributions depending on the amount of income. This solution is to be similar to the settlement of salaries and contributions of employees, with the difference that the entrepreneur runs at his own (not a small) risk," Teresa Warska added.

Therefore, in her opinion, the transformation of a sole proprietorship into a capital company, including a limited liability company, will probably bring more financial benefits. Contrary to sole proprietorship, where the owners are liable for their private assets without any upper limit, the company itself is in principle responsible for the obligations of the company. What is equally important, in capital companies partners are exempt from paying the Social Insurance Institution – including health insurance. The list of benefits is, of course, longer and includes, among others: greater loan options, greater market credibility, or the preferential CIT rate (9 percent).

(WBJ)