Personal exemption amount

Many employers have not kept up with the dynamic changes to the PIT Act and another amendment is already underway. This amendment brings changes to taxpayers’ salaries and the way they are calculated.

At the employee's request (PIT-2 statement), the employer may deduct the personal exemption amount in its calculation of the PIT advance. In this way, the employee pays the advance over the year and thus reduces their annual liability to tax authorities. 

Taking account of the personal exemption amount, tax withholders reduce PIT advances by 1/12 of the personal exemption amount, which is currently 425 zloty. 

Only one tax withholder may apply the reduction. Therefore, a taxpayer who has several employment relationships is allowed to choose only one withholder to apply the reduction.

The personal exemption amount cannot be used when calculating advance payments for e.g. contractors or staff on management contracts who derive income from work performed personally.

Currently, this option is unavailable also for taxpayers whose employer is based abroad or who pay PIT advances on their own.

Once a lower, 12 per cent tax rate in the first tax bracket is implemented, PIT advance may be reduced by 1/12 of the personal exemption amount totalling 300 zloty, and not 425 zloty as before. 

According to changes planned by the government, the personal exemption amount may also be allocated among several entities. Taxpayers earning income from more than one tax withholder in a month may distribute that amount among up to three withholders and authorise them to use it.

This means that in their statements submitted to the withholder taxpayers may authorise it to reduce their PIT advances, respectively, by the following amounts:

If the changes become law, the personal exemption amount will be available not only to employees but also to persons hired under contracts of mandate, contracts for specific work and management contracts.

In connection with the above changes, tax withholders will be required to inform employees about new regulations and receive new, properly modified statements with respect to the personal exemption amount.

Under the amended statute, the personal exemption amount may also be used, among others, by taxpayers who earn their income under employment relationship or from retirement and disability pensions from abroad as well as by contractors and managers who earn income on which they pay tax on their own.

If you have any questions about changes to the personal exemption amount, please contact Rödl & Partner experts.