Zero PIT for persons under 26 years of age vs. the practical problems of payers.

Yesterday, the president signed an amendment to the Personal Income Tax Act, introducing “zero PIT” for persons under 26 years of age.

Accordingly this novel, “zero PIT” will take effect from 1 August this year.

This exemption will only cover revenues from the service relationship, employment relationship, outwork, cooperative employment relationship and revenues from the majority of contracts of mandate. In other words, persons who generate revenues from other sources, e.g. non-agricultural activities or contracts for specified work, will not benefit from it.

The exemption will apply to revenues not exceeding PLN 85,528 per annum, which corresponds to the upper limit of the current first threshold of the tax scale. In 2019, the limit of revenues covered by the exemption is lower and amounts to PLN 35,636.67.

The introduction of the PIT exemption for persons under 26 years of age means new obligations for payers. They will have to monitor the age of the employee or the commissioned party (up to the age of 26) and the limit amount of the exemption. This forces changes in HR systems.

Importantly, the new regulations do not specify how the payer should act, if the taxpayer loses the right to exemption in a given month – whether due to his/her 26th birthday or exceeding the amount of the exemption limit. According to the transitional provision concerning the revenues obtained in 2019, one can presume how the payer should act, but how the tax authorities ultimately approach this issue will only be discovered in practice.

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