[Poland] The New Order – planned changes to the health contribution

One of the changes under the New Order announced by the government is to make health contributions equal and to remove the option of deducting them from income. How will these new rules affect employees and employers?

On 15 May, the Prime Minister presented the Polish New Order, a socio-economic programme for the post-Covid period, the implementation of which is to take place in 4 stages. One of the planned changes involves introducing a new way of calculating and settling health insurance contributions. This will affect both the operations of entrepreneurs and the incomes of their employees.

Health contribution under the New Order vs current rules

Currently the health insurance contribution is 9% for all employees, the differences are in the way it is calculated:

• for those employed under contracts of employment and contracts of mandate or equivalent contracts, health contributions of 9% of their income shall be calculated, collected and paid by the payer of the contributions, i.e., by the employer,
• for those conducting business activity, the amount of contribution does not depend on the entrepreneur’s income, but has a form of a lump sum, calculated on the basis of the average monthly remuneration in the enterprise sector in the 4th quarter of the previous year, including profit distributions. Currently, the lump sum amounts to PLN 381.81 (9% of the base for calculation – PLN 4 242.38). This is the minimal contribution rate and an entrepreneur can declare to pay higher ones.

Under the existing model, both employees with contracts of employment, contracts of mandate and other equivalent contracts and the self-employed are allowed to deduct part of their health contribution – 7.75% of the calculation base – from their taxes. Under the New Oder, however, this option is to disappear as from 2022.

Health contribution – no deduction in PIT

The end of the possibility to deduct 7.75% of the calculation base of the health contribution from the tax due will result in an increase in the tax burden for employees and entrepreneurs.

For example, an employee earning around PLN 7 000 gross who currently pays 17% tax (the first tax threshold) will pay 24.75% income tax (7.75% more).

A self-employed person, currently taxed under the 19% flat tax, after the change will pay tax at the rate of 26.75% of income (19% + 7.75%).

Single health contribution – 9% for all

One thing will remain unchanged and that is keeping the health contribution at 9%, but it will be calculated on income for all. The existing lump sum for entrepreneurs will therefore disappear.

At the same time, there is to be a minimal contribution rate so as to eliminate situations in which entrepreneurs who incur high costs and have no income do not pay health contributions at all.

Learn more: How to organise vaccination against COVID-19 in the workplace?

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