Polish Deal: Limited tax-deductibility of health insurance contributions

by Weronika Nazarkiewicz and Maria Wośkowiak

1 June 2022 ​

The right to reduce income tax by the amount equal to 7.75% of the health insurance contribution assessment base was repealed on 1 January 2022. Now the legislators have again amended the rules on tax-deductibility of health insurance contributions.

Pursuant to the draft act, the new regulations are supposed to enter into force on 1 July 2022 and will allow payers of linear or flat-rate tax and taxpayers using a tax card to deduct the contributions from the taxable base. It will be allowed to reduce the taxable base by the health insurance contributions up to a certain limit.

Tax brackets

The tax-deductibility of health insurance contributions will not apply to persons accounting for income tax on general principles according to tax brackets. To make up for the non-tax-deductibility of health insurance contributions to taxpayers using tax brackets the lawmakers reduced PIT rate from 17% to 12%.

Linear tax, flat-rate tax and tax card

Persons paying linear PIT, flat-rate PIT on recorded income or using the tax card will not benefit from the PIT rate reduction. The lawmakers have a different solution for them.

They have proposed that the health insurance contribution paid by taxpayers accounting for tax using a fixed 19% tax rate (the so-called linear tax) on the business activity taxed in this way will be deductible from income or from tax related to activities taxed in this form. The annual deductible amount of the contributions will be capped at 8,700 zloty in 2022 and will be indexed every year.

In addition to taxpayers carrying out business activity subject to linear tax (19%), taxpayers who pay flat-rate tax on their income from business activities and who account for tax using the tax card will be allowed to deduct some of the health insurance contributions.

The deductibility limits will be as follows:

1. for linear tax payers – 8.7 thousand zloty (deduction from income or recognition under tax-deductible costs);
2. for flat-rate tax payers – 50% of the paid insurance contributions (income reduction);
3. for tax card users – 19% of the paid contribution (income reduction).

The new regulations are planned to be effective from 1 July 2022 but in accordance with the transitional provision, they will apply retroactively to income (revenue) earned since 1 January 2022.

If you have any questions, you are welcome to contact Rödl & Partner experts.