Advance income tax payment – new rules

Since 2020, the way of collecting advance payments for income tax has altered. Those who enter the second tax threshold will pay the higher tax in the month in which their income exceeds PLN 85 528, not from the following month, as was the case so far.

The new rules for deducting income tax advance payments shall apply to income received from 1 January 2020. Nowadays, the advances are collected as follows:

  • 17% until the taxpayer’s income has not exceeded PLN 85 528
  • 32% from the date on which the taxpayer’s income exceeds PLN 85 528

Thus, in the month in which the taxpayer’s income exceeds the first tax threshold, the advance payment will be 17% of the part of the income which did not exceed PLN 85 528 and 32% of the surplus over that amount.

Until now, the higher tax rate has only been applied in the month in which the limit was exceeded. Taxpayers whose income does not fall within the first tax bracket will therefore pay a higher tax during the year, but at the same time avoid the surcharge in their annual tax return.

Tax on bonuses

According to the new regulations, the mechanism of paying annual and December bonuses at the beginning of the following year will lose its legitimacy. So far it has been possible to defer tax payment on such bonuses until the annual tax return in the following year. At present, the taxpayer shall pay an advance tax on the bonus in real time.

Simplified advance payments on PIT and CIT

Taxpayers who settle income tax on general principles or on a flat rate basis have the opportunity to take advantage of simplified income tax advance payments. It involves paying one lump sum every month, which is calculated on the basis of income for one of the two previous tax years. In 2020, these shall be tax returns submitted in 2019 and 2018 covering income from 2018 and 2017.

If the taxpayer has not achieved taxable income during the previous two years, the tax return from two years ago should be used to calculate the amount of the simplified advance payment. If that income has not exceeded the tax-free amount, the simplified model cannot be used.

In the case of choosing a simplified PIT advance payment, the taxpayer has the possibility to deduct a health insurance contribution from it, whereas he cannot deduct social security contributions.

Simplified advance payment – always in the same amount

Taxpayers who opt for a form of simplified PIT or CIT advance payments are obliged to apply it for a full tax year if they conduct business operations during that time. However, this is associated with the risk of paying higher advance payments also in periods of large revenue reductions, e.g. for seasonal businesses.

A simplified income tax advance payment shall be made by the 20th day of the month.

Learn more: Contributions to Employee Capital Plans (PPK) 

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