Tax relief without PIT for young people, not for companies and contracts for specific work

Service

From August 1, 2019, the so-called tax relief without PIT for young people. Due to this change, will people under 26 always be exempt from tax? What is this relief? Who can use it? We answer these questions in the article.

What is the relief without PIT for young people?

Tax relief without PIT for young people consists in exempting from taxation the income of employees employed under an employment contract or contract of mandate. It applies regardless of the number of contracts or the number of payers. The relief without PIT for young people will cover the income from work of people up to 26 years of age up to the amount of PLN 85,528 in the tax year. However, when earnings exceed the threshold, only the surplus (over PLN 85,528) will be taxed according to the tax scale. Relief without PIT for young people is valid only up to the level of the first tax threshold (up to PLN 85,528) during the year. Subsequently, a tax of 17% should be deducted from the salaries of young people.

Tax relief without PIT for young people, not for companies and contracts for specific work

The legislator only provided for the possibility of exempting from tax the income of an employee employed under an employment contract or a mandate contract, subject to taxation on general principles. That is, people who decide to run a sole proprietorship and are employed under specific specific contracts are excluded from the circle of eligible persons.

This state of affairs is negatively commented on, considered unjustified and unfair. Therefore, some experts claim that it is justified to extend persons entitled to apply the tax exemption to persons employed on the basis of contracts for specific work, as well as sole proprietorships.

Start a free 30-day trial period with no strings attached!

Combining activities with a mandate contract

In the current situation, some people want to transfer some of their operating revenues to a mandate contract in order to take advantage of the tax relief. Pursuant to the applicable regulations, entrepreneurs have the option of simultaneously running a business and performing work on the basis of a mandate contract. However, it is assumed that this is possible only when the contract relates to activities completely different than those performed as part of the business. So if the mandate contract has the same scope as the nature of the business, the revenue from the mandate should be included in the revenue from the business.

There were voices among legal advisers that the provisions do not prohibit business activity and performance of mandate contracts identical to the nature of activities performed in the company. In this case, the settlement should be made in two ways, tax is payable on business activity, while the order will be free from it. However, in such situations it should be remembered that it is best to apply for individual interpretations of the authorities. Thanks to that, the tax will be calculated correctly and the young entrepreneur will not bear any financial consequences.

A mandate contract is more favorable than a specific-task contract

In accordance with the regulations, the tax relief without PIT for young people will not apply to contracts for specific work, which means that remuneration for them will have to be taxed. It follows that from now on it may be more advantageous to conclude mandate contracts with a student or student up to the age of 26. Such agreements do not constitute grounds for compulsory ZUS contributions, and in this case it will be possible to take advantage of the no-pit relief for young people.

It may happen that some people decide to sign a mandate contract in order to reduce employment costs. However, it should be remembered that the subject of a specific work contract are activities that give a specific, tangible result, both material and non-material, and the contractor is responsible for the result of his work. However, in the case of a contract, the order accepting the order undertakes to perform a specific legal action with due diligence and is not responsible for its effect. Therefore, when choosing the type of contract, this aspect should also be taken into account and the decision should be based mainly on the subject of the contract and not solely on financial considerations. In this case, it is necessary to properly define the scope of the contractor's obligations. If it is incorrectly determined, the tax office will charge the tax with interest on such a contract and may impose a financial penalty. From 2020, the income of people up to the age of 26 is automatically exempt from taxation and people who are entitled to a tax relief without PIT do not have to submit declarations in order to be granted it.

Example 1.

A person aged 24 was employed on the basis of a specific task contract, receives a gross remuneration of PLN 3,000, using standard tax deductible costs (20%) net, it will be: PLN 22,592.00. Due to the fact that the tax relief without PIT for young people does not apply to contracts for specific work, the net amount of remuneration will not change.

Example 2.

A 24-year-old student was employed on the basis of a mandate contract and receives a gross remuneration of PLN 3,000. In this case, the net salary will be equal to the gross amount, because the student is exempted from the insurance obligation towards ZUS (he or she should have insurance from the university or "at the parent") and is covered by the allowance without PIT for young people.

Summarize, the tax relief without PIT for young people is valid only in the case of income from the employment relationship, employment relationship, homework, cooperative employment relationship and contract of mandate. On the other hand, income from a specific task contract and from own business activity will remain taxed on the basis of the existing rules.