The Finance Minister has changed the rules governing the collection and remittance of advance income tax on individuals. The changes, which took effect on 8 January 2022, were introduced by way of the Finance Minister regulation of 7 January 2022 on the extension of time for certain withholding agents to collect and remit advance payments of personal income tax (PIT).
The major changes are outlined below:
- For advance monthly PIT payments on gross income of up to PLN 12800 monthly, withholding agents must calculate the difference between such payments under the new law and under the old law in force until 31 December 2021. Then they must do the following, depending on the outcome of the calculation:
- if the difference is positive (there is a “surplus” as the advance payment under the new law is higher than under the old law), they will collect and remit the lower amount (without the surplus), which for all practical purposes means they will do the monthly advance tax calculations according to the same rules as those in force in 2021;
- if the difference is negative (the advance payment under the new law is lower than under the old law), they will collect and remit the payment for the given month and, in addition, any surpluses for earlier months of 2022 up to the amount of the negative difference.
- If a withholding agent has already withheld the advance tax for January 2022 under the new rules and but has not remitted it yet to the tax authorities, it must refund any surplus as above to the taxpayer.
- Those rules apply to advance PIT withholdings in any month in which the taxpayer’s gross income received from the agent is not more than PLN 128000 and has been earned by way of:
- employment, appointment, outwork, cooperative employment, money allowances paid by employer, patronage refunds in cooperatives;
- pensions, disability benefits (including renta socjalna), pre-retirement benefits and allowances, compensation allowances for teachers, money allowances paid by the social insurance system, agricultural restructuring rents (renta strukturalna), and allowance for parents giving up employment to raise children (rodzicielskie świadczenie uzupełniające);
- contracts for services under Article 13(8) of the PIT Act (Journal of Laws of 2021, item 1128);
provided that the PLN 12800 limit applies to each such source of income separately.
- The above rules will not be applied where a taxpayer submits a relevant written request to the withholding agent. The request may only be submitted to withholding agents who do not make deductions for 1/12 of the personal allowance.
- Note that the new law and how it addresses these matters gives rise to certain concerns:
- Rules governing the calculation of advance tax payments should be amended by an act of Parliament. In this case, they were amended by secondary legislation issued by the government.
- In practice, the method prescribed by the new law requires withholding agents to make advance tax payment comparisons between 2021 and 2022 law all throughout the year, thus substantially increasing their payroll workload.
- Given its title and content, the new law is about “extension of time to collect and remit” advance PIT payments, but not about waiver of collection. It is therefore to be expected that even if advance tax is withheld during 2022 in accordance with the 2021 rules (i.e. if there is a “surplus” as above), the taxpayer’s tax position will be brought in line with the current law anyway, whether in subsequent months or, at the latest, in their annual tax return, meaning a top-up tax payment will be charged from the taxpayer themselves.
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