13 December 2021

Health care contributions and new rules for salaries (Polish Deal)

The most important and comprehensive amendment of recent months, the Polish Deal, will finally enter into force on January 1st, 2022. The new set of laws introduces changes in many sectors of the system, especially fiscal and financial.

From the point of view of both employers and employees, changes in health insurance contributions are the most significant. They directly affect wages and salaries, which will consequently affect the budgets and may adverse financial condition of smaller companies due to the higher overall payroll obligation.

Health contribution under the Polish Deal

First, let us remind you that currently (before the entry into force of the provisions of the Polish Deal on January 1st, 2022), the percentage rate of the health insurance contribution is 9%, with the possibility of deducting up to 7.75% of the tax base.

The new rules for determining the amount of health insurance contributions will each time depend on the form of taxation chosen by a given taxpayer. For this reason, taxpayers must prepare for changes in the basis of the calculation of the contribution and the rules for its deduction.

The new regulations, depending on the adopted form of taxation, indicate the amounts and arrangements by the following:

  • the monthly amount of the health insurance contribution will be:
    • the tax scale: 9% of income, not less than 270.90 PLN.
    • flat tax: 4.9% of income, not less than 270.90 PLN.
    • tax card: 270.90 PLN.
  • annual contribution amount:
    • the tax scale: 9% of income, not less than 3 250.80 PLN.
    • flat tax: 4.9% of income, not less than PLN 3 250.80 PLN.
    • tax card: 3 250.80 PLN.

Change no. 1: new contribution assessment basis

Starting from 2022, the health insurance contribution will be calculated individually, based on the income earned by the entrepreneur. This is a significant change because currently (until the end of December 2021), the contribution base was set at 75% of the average monthly remuneration in the enterprise sector in the fourth quarter of the previous year, including payments from profit. The amount of the basis of assessment was announced annually by the Director of Statistics Poland (GUS).

If the income/revenue is too low for a contribution to be assessed, and at the same time the taxpayer qualifies for the obligation to pay, a minimum threshold will apply. The contribution calculation basis for a given month cannot be lower than the minimum wage in force on January 1st of a given year.

Following the above, assuming the minimum remuneration for work in 2021 – at the current amount of 3 010 PLN gross – the health insurance contribution amount in 2022 will equal 270.90 PLN. Proportionally, with a remuneration of 30 000 PLN – the contribution will amount to 2 700 PLN.

Change no. 2: abolition of the possibility of deduction

However, the most crucial information for entrepreneurs is the abolition of a rule that allows deducting 7.75% of the tax base from the personal income tax. In other words, the amount of tax in the annual declaration will not be affected by how much we paid for health insurance during the year.

The abolition in the field of personal income tax will apply to employees, contractors, and taxpayers subject to compulsory and voluntary health insurance contributions.

This means no less than a significant financial burden at the end of the fiscal year for every entrepreneur – especially for those with relatively high turnover and income.

Change no. 3: the principle of reducing the contribution

Currently and until December 31st, 2021, if the monthly contribution is higher than the income tax advance payment for a given month, it is possible to reduce the contribution to the amount of this advance – which the payers used willingly, even commonly.

Unfortunately, as in the case of the abolition of deducting the health contribution, the new regulations completely cancel the possibility of reducing the monthly health premium and do not introduce any new limit that would allow this value to be controlled.

Lump-sum health contribution – changes

Currently, for entrepreneurs taxed based on running a business, regardless of the taxation form, the health insurance contribution is 9% of the basis of its assessment, and it cannot be lower than 75% of the average monthly salary. This means a fixed amount, which in 2021 is 381.81 PLN per month.

The Polish Deal introduces changes to all forms of income taxation: scale, flat tax, and lump-sum. Entrepreneurs using the lump-sum must prepare for a fixed calculation basis of 9%, which consists of:

  • 60% of the average monthly salary: ~320 PLN
  • 100% of the average monthly salary, with income ranging from 60,000 PLN to 300,000 PLN.
  • 180% of the average monthly salary for income exceeding 300,000 PLN.

Here, too, are applying the new provisions regarding the non-deductibility of the contribution.

Exempt from the obligation to pay contributions

From 2022, taxpayers whose income does not exceed 50% of the minimum wage and who use the flat-rate tax on registered income will be eligible for exemption from the obligation to pay health insurance contributions for non-agricultural activities.

Other changes

The Polish Deal also introduces several technical or detailed changes, especially in the field of health insurance and the applicable deadlines. Among the changes:

  • New title to health insurance: the entity paying the remuneration to the person holding the function under the act of appointment will have to register the person for health insurance as well as settle and pay the contributions for this insurance.
  • Obligation to submit billing documents every month.
  • Exemption from submitting documents for (1) clergy, (2) persons submitting documents for nannies, (3) people with old-age and disability pension insurance.
  • Changes in ZUS DRA and ZUS RCA templates – more info here.
  • New deadlines for submitting documents and paying contributions:
    • payers with legal personality (capital companies, foundations) – by the 15th day of the following month;
    • payers without legal personality (natural persons, partnerships) – by the 20th of the following month
    • budgetary and local government units – by the 5th day of the following month (no changes).

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ARPI Accounting is a part of ARPI Group, a Norwegian holding which started to operate in Poland in 2001.