Tax-free amount in business

The tax-free amount is an amount that does not result in the obligation to pay income tax. In Poland, it is calculated on the principles published in Art. 27 sec. 1 of the Personal Income Tax Act of July 26, 1991. Read the article and find out more!

Tax-free amount - who is entitled and how much is it?

The tax-free amount is available only to taxpayers whose income is taxed on general principles, i.e. according to the tax scale. Currently, the tax-free amount is PLN 3,091.

Important! It should be remembered that failure to exceed the tax-free amount does not release the taxpayer from the obligation to submit a tax declaration and deliver it to the appropriate tax office. However, with income lower than PLN 3,091, he will not pay tax, and the amount of income tax advances paid during the year will be refunded to him in full.

How is income tax calculated?

The tax-free amount is taken into account when calculating the tax according to the tax scale.

The basis for calculating the tax in PLN		The tax is
above	down
	85 528	18% minus the amount reducing the tax PLN 556 02 gr
85 528		PLN 14,839.02 + 32% of the surplus over PLN 85,528

 

Pursuant to Art. 63 of the Tax Ordinance, the tax base, the amount of taxes, late payment interest and extension fees are rounded to the nearest tens of zlotys.

Important! If the ends of the amounts in the tax base amount to PLN 0.50 or less, the tax is rounded down to full zlotys. However, if they exceed PLN 0.11, they are rounded up.

 

Example 1.

In 2016, the taxpayer obtained an income of PLN 3,000. So how much will his income tax be?

Tax base PLN 3,000 x 18% = PLN 540

Taking into account the amount reducing the tax PLN 540 - PLN 556.02 = PLN -16.02

Thus, the income tax will be PLN 0.

Example 2.

In 2016, the taxpayer obtained an income of PLN 40,000. How much will the income tax be?

Tax base 40,000 x 18% = PLN 7,200

Taking into account the amount reducing the tax PLN 7,200 - PLN 556.02 = PLN 6643.98 - we round up to full zlotys.

The amount of tax after rounding = PLN 6644

Economic activity and full-time work

It is more and more common that entrepreneurs, apart from running their own business, also work full-time. Please note that you will only be entitled to one tax-free amount in this case. In the case of running a business and working full-time, it is worth knowing that the tax-free amount should be accounted for in the first place on business activities. You must also notify the workplace that you are giving up the right to deduct when calculating the advance on income tax, which is paid by the employer. The same is true if the employee establishes his own business activity during employment.

To sum up, the tax-free amount is the level of income at which the taxpayer is not obliged to pay income tax to the state. It should be remembered that failure to exceed the tax-free amount does not release the taxpayer from the obligation to submit a tax declaration.