A solidarity levy - for whom, from when, how to document?

On January 1, 2019, a new income taxation institution was introduced, the so-called a solidarity levy. Until April 30, 2021, natural persons will be obliged to submit a declaration on the amount of the solidarity levy. It applies only to people whose income, after taking into account the deductions, will exceed PLN 1,000,000. Below you will find information on who is obliged to pay the solidarity levy, in what amount and how to calculate it?

Who is required to pay the solidarity levy?

The solidarity levy is a new benefit regulated in the Personal Income Tax Act. Chapter 6a (provisions of Articles 30h-30i) applies to income (revenues) obtained from January 1, 2019.

The essence of the solidarity levy boils down to the obligation for natural persons earning more than PLN 1,000,000 to pay 4% of the basis for calculating the levy. Obliged to pay the tribute is not only a statistical Kowalski, but also a foreigner in Poland who earns income from specific sources.

The solidarity levy is an independent public-law burden on income tax. For this reason, natural persons are not exempt from paying income tax according to the rules provided for natural persons, including those running a business, i.e. taxed according to the tax scale or the straight-line method.

The purpose of introducing a solidarity levy is to collect a tribute from the richest, which will be supported by the Solidarity Fund for Support for Disabled People.

What income will you pay tribute on?

Not all income / income earned by natural persons will be included in the basis for calculating the solidarity levy. Will be excluded, among others dividend income, real estate disposal, undisclosed sources of income. The legislator excluded from the obligation to pay a solidarity levy also persons who earn income taxed with a flat-rate income tax, such as a tax card or a lump sum on recorded income. Income of natural persons subject to the Act on Succession Management of a Natural Person's Enterprise was also excluded.

A natural person should include in the tax base of the solidarity levy:

• income taxed according to the tax scale, incl. income from work, business activity, pensions, disability pensions, remuneration from contracts of mandate and for specific work, copyrights, etc.;
• income from the disposal of securities or derivative financial instruments for consideration, from the disposal of shares and stocks for consideration, and from the acquisition of shares and stocks for in-kind contribution;
• income from economic activity or special departments of agricultural production obtained with the choice of the flat rate of 19%;
• the income of the controlled foreign company.

A similar position was presented in the individual interpretation of the tax law provisions of October 7, 2019, file ref. 0113-KDIPT2-1.4011.404.2019.1.KO.

When determining the amount of the basis for calculating the solidarity levy, income earned abroad, exempt from tax on the basis of agreements on the avoidance of double taxation or other international agreements referred to in art. 27 sec. 8 of the Personal Income Tax Act (the so-called exclusion method).

How to calculate the tax base?

The basis for calculating the solidarity levy is the surplus of more than PLN 1,000,000 in the sum of taxable income on the principles set out in Art. 27 sec. 1, 9 and 9a, art. 30b, 30c and 30f u.p.d.o.f. (these are the income indicated in the above point) after reducing them by the amounts of social security contributions (including foreign) deducted from income, amounts included in the taxpayer's tax base of dividends received from a foreign controlled entity and the amount of income from disposal by the taxpayer of participation in a foreign the controlled entity, in part included in its tax base. Therefore, other deductions provided for in the annual settlement of a natural person are not deductible, such as: contributions to the individual retirement security account, donations, rehabilitation relief. The mere exceeding of the income in the amount of PLN 1,000,000 does not automatically mean that a natural person will be obliged to pay a solidarity levy. The basis for calculating the solidarity levy takes into account certain deductions from income. They are not the same as the deductions due to the taxpayer in the annual tax return. When determining the income limit to determine the amount of the solidarity levy, the income to be disclosed in the annual tax calculation is taken into account in:

• PIT-40A (provided that the tax resulting from this settlement is due tax) and
• in PIT-36, PIT-36L, PIT-37, PIT-38 and PIT-CFC tax returns, for which the deadline for submission is from May 1 of the year preceding the calendar year to April 30 of the calendar year.

To sum up, the algorithm for calculating the basis of the solidarity levy is as follows:
∑ 𝑑𝑜𝑐ℎ𝑜𝑑ó𝑤 - decreasing amounts - PLN 1,000,000 = basis for calculating the solidarity levy.
The basis for calculating the solidarity levy is rounded to full zlotys in the same way as the basis for calculating the tax (the endings of amounts less than 50 groszy are omitted, and the endings of 50 groszy and more are increased to full zlotys).

Example 1.

Mrs. Anna and her husband Ryszard run a business in the form of a general partnership. The preliminary income for the partners in total, including deductions, will amount to PLN 1,900,000.Will it be necessary to pay a solidarity levy from the amount of PLN 900,000, or assuming that each spouse will earn PLN 950,000, this will result in no obligation to pay a solidarity levy?

The solidarity levy applies to natural persons, each person separately, therefore in the case of married couples who make a joint annual tax return, it does not affect the determination of the obligation to pay the levy.

In the analyzed case, the income of each spouse is considered separately for the purposes of determining the solidarity levy. The planned income, taking into account the deductions, will not exceed PLN 1,000,000, therefore neither spouse will be obliged to pay a solidarity levy.

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The declaration on the amount of the solidarity levy should be submitted by April 30 of a given calendar year to the tax office where the income tax is settled, i.e. to the office competent for the place of residence of the taxpayer. The taxpayer is obliged to submit a solidarity tax declaration at the tax office competent for the place of residence on the last day of the tax year, and when the residence in Poland ceased before that date - at the tax office servicing the head competent according to his last place of residence in the territory of the country.

The taxpayer is obliged to submit a declaration of the amount of the solidarity levy according to the formula on the DSF-1 form. It may be submitted by a natural person in both paper and electronic form. Moreover, it is possible to submit the declaration by an attorney, provided that the power of attorney to sign the declaration is submitted. When determining the amount of the basis for calculating the solidarity levy payable within this period, the income obtained from January 1 of the accounting year and the amounts reducing this income, shown in PIT-36, PIT-36L, PIT-37, PIT-38, PIT-CFC and PIT- are taken into account. 40A, the deadline for submission of which expires on April 30 of the following year.

The solidarity levy should be paid to the appropriate account of the tax office in matters of personal income tax. It is the tax authority that will be obliged to transfer funds from solidarity levies to the Solidarity Support Fund for Disabled People.

It should be remembered that untimely payment of the solidarity levy will result in the necessity to pay interest in accordance with the provisions of the Tax Ordinance Act, and even initiation of enforcement proceedings.

Natural persons with an income exceeding PLN 1,000,000,000 are required to pay the solidarity levy. These persons, in addition to the income tax calculated according to the tax scale or flat tax, are obliged to pay an additional solidarity levy in the amount of 4% of the calculation basis. The amount of the tribute and the relevant tax declaration are required to pay and submit by 30 April after the end of the tax year.