Tax optimization - Personal Income Tax in 2009 - Mazars - Poland

"Tax optimization - Personal Income Tax in 2009"
Anna Szyszka - Tax advisor, Mazars office in Cracow

16/03/2009

The Warsaw Business Journal of 16 March 2009

Tax scale

Although provisions regarding a new tax scale entered into force on January 1, 2009, taxpayers in Poland will still be taxed in either the 19, 30 or 40 percent tax bracket in the PIT return for 2008.

The new marginal rates are 18 and 32 percent. The threshold regarding the latter rate is relatively high (zl.85,528) and, as the majority of taxpayers belong to the former group, the system will be like a flat tax for them (with reliefs and reductions). It may turn out that the effective tax rate for the majority of taxpayers will hover around 15 percent.

Joint taxation of spouses

In the context of both new and old PIT regulations, it can sometimes pay off to have a husband or wife who earns less. Nevertheless, the basic rule is the separate taxation of spouses' incomes; after fulfillment of certain conditions, they may file a motion included in the joint tax return and be taxed jointly on the sum of their incomes.

In order to use this solution, a marriage must fall under the regime of communal property. Spouses must stay married for the whole tax year. Joint taxation of spouses is applicable also in the case when one spouse did not earn income from a taxable source or earned income below the taxable threshold.

After recent amendments, spouses whose place of tax residence is located outside the EU, the European Economic Area or Switzerland can also be taxed jointly or singly. However, this rule is only applicable if the spouse earned taxable income within the territory of Poland which constituted at least 75 percent of their overall income for the given tax year and, moreover, have documented their place of tax residence with a certificate.

Housingand family reliefs

A new housing relief re­places the one which was in force from 2007 to 2008, but it is only applicable to legal activities which have taken place since the start of 2009. Income from the sale of land or property is tax free, unless it was executed within the framework of economic activity and was accomplished within five years of the year of purchase or construction.

The exemption is applicable to the amount of this sale income multiplied by the portion of expenses for own housing purposes. In order to count the value of the relief this way, the expenses must be borne between the date of sale and the date two years from the end of the tax year of the sale. The Personal Income Tax Act contains a closed catalogue of allowable expenses.

Another relief, regarding families, allows a deduction on income tax to be made for every child in a family. However, the health contribution must be deducted from income tax first. This relief is applicable to taxpayers who pay taxes according to general rules. These taxpayers should have, during the tax year, provided care for their own child or served as guardian if a child was living with them or if they served as a foster family.

In the tax return for 2008, the maximum amount is zt.1,173.70 for every child (for one or both parents).

In summary

As stated before, the new two-bracket tax scale will be applied to our earnings starting from January 2009. The upper threshold is relatively high and the majority of taxpayers will pay personal income tax on the basis of one rate, so it will be like a flat-rate tax system with reliefs and reductions.

However this year's tax solutions constitute a step towards the flat-rate tax system.