Employment & labor law

ZERO PIT – a new relief for employees under 26 years of age

On August 1, the amendment to the Personal Income Tax Act entered into force. One of the key changes is art. 21 section 1 point 148 which provides that income from the service relationship, employment relationship, outwork, cooperative employment relationship and commission contracts received by the taxpayer up to the age of 26 up to an amount not exceeding PLN 85,528 in tax year is free of income tax. It should be noted that this limit is independent of the number of contracts under which a given person earns income, and in 2019 is lower and amounts to PLN 35 636.67.

So how do you take advantage of the new relief?

In order for the employer not to deduct the income tax advance from the salary of a young employee (contractor) from August 1, 2019, the employee (contractor) must submit to the employer (principal) a written statement that obtained in the period from August 1, 2019 to December 31, 2019 revenues from the titles specified in art. 21 section 1 point 148 of the amended act will be entirely tax free. Submission of such a declaration entitles the employer (principal) not to deduct the income tax advance from the month following the month in which the employee made such a declaration. IMPORTANT! Failure to submit the described declaration means that the employer will be obliged to deduct income tax advances to the employee (contractor) until the end of 2019, while the overpayment thus obtained may be recovered by the employee (contractor) in the annual tax return.

From 1st of January 2020, the employer (principal) will not deduct income tax advances for employees ‘automatically’ – until they are 26 years old or until the income limit of PLN 85,528 is exceeded. If the limit is exceeded if you receive revenue from several sources, you will need to submit a written request not to exempt. Otherwise, the amount of tax payable will be specified in the annual settlement of such employee.

What should you pay special attention to?

The legislator has not decided to exempt tax paid on the basis of mandate contracts subject to flat-rate income tax. It should be noted that if the amount of the receivable, specified in the contract concluded with the person other than the employee of the payer, does not exceed PLN 200 – a flat-rate income tax of 18% is collected from revenue. However, according to art. 30 section 10 of the Act on personal income tax, the provisions of Art. 21 section 1 point 148 of this Act. This means that young people not in employment, whose remuneration specified in the contract will not exceed PLN 200, will still have a personal income tax deduction, despite the fact that their annual income may be very small

Author team leader DKP Legal Alicja Myśluk-Landowska
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