The limitation of the abolition allowance will hit Poles working, among others in the UK. The latest ministerial tax-tightening project will prevent the double taxation evasion allowed by the bonifkata. The changes are to enter into force at the beginning of next year.
Abolition relief to be reduced
Abolition relief is a solution in the Polish tax system that allows you to pay taxes in accordance with the tax law of a given country. Thanks to it, employees residing abroad are not exposed to double taxation. The Ministry of Finance is planning to implement important changes in this respect.
The latest draft amendment to the Income Tax Act assumes limiting the abolition allowance to PLN 1,360 from January 1, 2021. This means that it will be used by people whose foreign income does not exceed PLN 8,000. PLN. You will have to pay tax on each surplus to the Polish tax office. For example, a person who in a given country paid 15 percent. tax, will have to transfer another 17 percent in Poland, i.e. the difference between the foreign and Polish rate (32 percent).
Abolition allowance and differences in taxation depending on the country
In the opinion of Dziennik Gazeta Prawna, the abolition of the abolition allowance will emphasize differences in taxation depending on the place of earning. Due to the lack of consent to unfavorable tax calculations in France, Germany or Spain, people working in these countries will still be able to count on privileged treatment (the so-called exemption with progression). The changes in the abolition relief will affect Poles working, for example, in the Netherlands, Belgium or Great Britain, who will have to pay tax on their foreign income according to the Polish scale.
Daria Zięba, senior consultant and tax advisor at EY, cites two examples to show the scale of changes in the abolition relief. The tax burden on the resident with income from work in Poland and Germany of the order of PLN 300,000 PLN, will be by 28 thousand. PLN lower than in the case of a person who earned the same amount while working in Poland and Russia. The modifications to the abolition relief will be felt most by Polish workers residing in the United Arab Emirates, where they do not pay income tax at all. The abolition of the abolition allowance means that the entire tax will be transferred to the tax office.
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Where did the idea for changes in the abolition relief come from?
The Ministry of Finance explains that the limitation of the abolition allowance is dictated by the desire to tighten taxes. In the opinion of the ministry, it is time to put an end to the times when taxpayers did not pay any tax on income earned abroad or paid it to a small extent.
The ministry points out that the modifications to the tax relief will mainly concern the earnings of people working in companies that carry out complex international tax optimization. The analysis of the National Revenue Administration shows that the abolition relief is used in relation to income from partnerships established abroad in order to avoid paying taxes in Poland.
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