Zero PIT (Personal Income Tax) for the youth - a great disappointment
An unpleasant surprise for young people who counted on full tax exemption. The Ministry of Finance confirmed that the law stipulating that the income from orders should be taxed up to PLN 200 at a lump sum is still in force. And it also applies to people up to 26 years old.
It is not logical. After all, many young people take advantage of small, odd jobs, for example students handing out leaflets during the summer holidays. It seemed that the new exemption is primarily for them.
Let us remind you that zero PIT for young people has been in force since August 1. It is available to people up to 26 years old on a full-time or contract basis. The limit of tax-free revenues is PLN 85,528 per year. This year, the relief will be used by those whose revenues, calculated from August to December, will not exceed PLN 35,636.67.
The new exemption can be found in Art. 21 paragraph 1 point 148 of the PIT Act. At the same time, Art. 30 sec. 10 states that the relief does not apply to lump-sum taxable income. Among other things, orders up to PLN 200 (concluded with a person who is not an employee of the payer who has to deduct the tax).
Does this mean that the young's income from such an assignment is still taxed?
According to the Ministry of Finance, the exemption for young people does not apply to lump sum income. Unfortunately, the 18% tax paid cannot be recovered on an annual basis. Lump-sum taxable income is not shown in the annual tax return.
How many young people can lose on this exception?
Let's assume that a 22-year-old student makes an appointment for PLN 200 for help with unloading the goods. He has heard about the exemption of young people from PIT, so he is convinced that he will get the entire amount. The principal must, however, deduct a flat-rate 18% tax, so the student will receive only PLN 164.
Is it possible to avoid the tax?
There are three ways. The first, the easiest, instead of 200, give 201 zlotys. Second, combine the contracts, e.g. instead of two, sign one, so that the amount due exceeds the limit. Third, accept the hourly rate for settlement, then we will not pay the tax, even if the payment does not exceed PLN 200.
Taxing small orders is not the only bad news for young people interested in relief. They will not use it if they earn on a specific work contract or in their own company. In the opinion of the Ministry of Finance, full-time and contract work are the most popular forms of professional activity, therefore only them are preferential.
In order to take advantage of the exemption, it is therefore necessary to change the rules of operation. For example, a young businessman may shift some of his income to a contract. It's legal. The regulations do not prohibit running a business and executing mandate contracts outside of it, even identical to what is done in the company. The tax authorities also agree to this in their interpretations.
Young people who are still employed under a specific work contract also have room for maneuver. As a rule, it can be converted into a tax-free order.
People who want to take advantage of the discount this year must inform the payer (employer or principal) about it. Otherwise, he will still withhold tax advances, which they will recover only after submitting the tax return (i.e. next year). The payer is not obliged to apply the exemption automatically.
Next year, the settlement is to be different. The payer himself will not deduct advance payments for PIT, no statement of the employee (contractor) is needed. But he can apply for the waiver not to be applied. It is worth doing this when we earn in several places and failure to collect advances by all payers will result in a large tax surcharge in the annual tax return.
Everything indicates that the legislator, introducing the PIT exemption for young people, with full awareness left in the regulations the lump sum taxation of orders up to PLN 200. It's hard to understand why. After all, many young people earn money on such small orders. And they will pay the tax, as the lump sum is obligatory. This can be quite a disappointment for people who counted on full relief. Especially that those who earn more on the commission are exempt from tax. On this occasion, it would be worth considering whether the provision on a lump sum on revenues up to PLN 200 makes sense at all. It causes inequalities in taxation. It also forces the parties to the contract to modify the rules of cooperation in order to avoid tribute.
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