![Novelty. Changes in taxes in 2021. From 2021, people working abroad will again pay their PIT twice [4.10.2020]](https://i0.wp.com/d-art.ppstatic.pl/kadry/k/r/1/03/5a/5f75736d001e8_o_original.jpg?fit=%2C&ssl=1 "Novelty. Changes in taxes in 2021. From 2021, people working abroad will again pay their PIT twice [4.10.2020]")
In practice, this will be the effect of reducing the so-called the abolition amount in the Personal Income Tax Act – PIT, which the government intends to make. This is of colossal importance for people earning in some countries in Europe and the USA, with which Poland still has unfavorable double taxation agreements for taxpayers, with a structure that allows paying tax in the country of earnings, and on the surplus – additionally in Poland, in accordance with Polish tax rates . The abolition quota was introduced precisely to overcome these unfavorable rules without the need to renegotiate international agreements, but now we will practically return to paying two income taxes.
This is very bad news for many Poles who regularly work abroad. They will have to pay PIT according to the Polish tax table, and most of them earn more than approx. 20,000. euro, some of them will cover the rate of 38 percent. – much higher than e.g. in the Netherlands, Austria or the USA, with which Poland has signed agreements on the avoidance of double taxation using the proportional deduction method.
Abolition relief is available to people who earn income abroad and who are also a Polish tax resident, i.e. they have a center of life interests in Poland. In order to prevent double taxation, states agree among themselves how and in which country income will be taxed.
Depending on the concluded agreement, Poland uses two methods of avoiding double taxation. The method of exclusion with progression and the method of proportional credit. The method of exemption with progression is more favorable for taxpayers because it does not require taxation of income earned abroad in Poland. They are shown in the annual tax return for the sole purpose of determining the tax rate.
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The proportional credit method requires the calculation of tax on total income earned in Poland and abroad, with the possibility of deducting foreign tax. However if the tax paid in another country is lower than the Polish tax, the taxpayer must pay the difference.
Abolition relief relieves taxpayers from the need to pay this difference and at the same time equalizes the situation of taxpayers who would find themselves in a worse situation due to the fact that Poland concluded a less favorable double taxation avoidance agreement with the country in which they work.
The method of proportional deduction is provided for, among others, in agreements concluded with: Austria, the Netherlands, Kazakhstan, Russia, Slovenia and the United States.
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The government by limiting the so-called abolition relief up to PLN 1,360, it actually eliminates it – experts believe
From 2021, the tax relief will be practically abolished (in practice, subsidies, which are now redeemed as the so-called abolition thanks to the relief, go into thousands and tens of thousands of zlotys), which is justified by the government by the fact that currently the differences in the rules of settlement are widely known from foreign income and taxpayers who have such knowledge can freely choose in which country they want to earn income.
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Poles do not know tax regulations
According to Anna Misiak, vice-president of the CIT / PIT Group of the Tax Council of the Lewiatan Confederation and Partner at MDDP, when formulating such a thesis, the designer does not seem to want to notice that the issues of methods of avoiding double taxation between individual countries are secondary for taxpayers taking up employment abroad. In this case, for example, the knowledge of the language of the target country, the amount of earnings or simply availability are much more important job offers.
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During the period of the abolition allowance, taxpayers did not have to worry about thoroughly understanding the intricacies of individual methods – it was enough that they knew that when earning income from work outside Poland and paying taxes abroad, they would not, as a rule, be obliged to make additional tax subsidies in Poland.
– The abolition of the abolition allowance will lead to the need to delve into this subject, and considering the problems that taxpayers had before 2008 (the tax relief has been in force since this year), it is more than probable that there will be a return to the state from that period when it was found that the introduction of such relief was necessary – emphasizes the expert.
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