Zero PIT for young people – who and when will benefit from tax exemption

1st August 2019 the zero PIT for young people has become effective. This is a new, special personal income tax (PIT) benefit for young people. Below we answer the question what you need to do to use this exemption – for yourself or for your young employees / contractors.

Who can “pay” 0% income tax?

Income tax exemption applies to those under the age of 26 who earn income under:

1. employment contract,
2. cooperative employment,
3. service contract,
4. work under contract,
5. contract of mandate.

What’s important, zero PIT does not applyto contracts for specific task [umowa o dzieło] or business owners.

How much can you gain?

The new rules apply to those taxpayers whose income in the financial year is below the stipulated threshold. In 2019 it is PLN 35,636.67 (i.e. 5/12 of the annual limit), and as of 2020 it will be PLN 85,528.00.

If your earnings or the wages of your employee exceed those thresholds, only the excess will be taxed according to the applicable tax rate. In such case you are also entitled to take advantage of the tax-free amount.

The number of contracts or the number of employers is not relevant for eligibility for this exemption. So there is only one condition: total earnings from all sources must not exceed the allowed threshold.

What should you do for zero PIT to be applied and to receive/pay out higher wages?

For the employees/contractors to receive higher wages starting from August (i.e. without the standard income tax withholding), they must submit a statement to their employer or principal that their income is subject to PIT exemption in full as it does not exceed the threshold set out in the preceding paragraph. Template of such statement is available on the website of the Ministry of Finance HERE.

If you employ a person who complies with all the above requirements, you can refrain from withholding income tax in 2019 only after receiving relevant statement by that person. In 2020 such statement will not be required – exemption will apply automatically by virtue of law.

Those who miss the deadline for the statement in 2019 can claim tax refund under this benefit in their annual statement.

Author:
Natalia Wojciechowska, Legal Adviser