Poland Tax: Part 6: Calculation 10
we have special relives from the tax (not tax basis) regarding the child relief. the amount is limited and the limit is upto 56000. if the case is single parent the limit goes upto 112,000. if the tax payers have more than 1 child, then there is no limit at all. for the first child in family 1112 PLN, for the second child the relief is the same, for the third child there is 2000 PLN. for the next children we have 2700 PLN.
Zosia is raising her daughter Kate (10 years old). In 2020, Zosia was employed at Capital company as a manager in the HR department. Her monthly salary was PLN 11,500 (gross).
(1) In 2020, Zosia received a monthly rent of PLN 2,000 for renting a flat (which she inherited from her grandmother).
(2) In March 2020, Zosia spent PLN 8,200 on the redecoration of her grandmother’s apartment. She archived all invoices.
(3) The apartment is 100 m2 large.
(4) Zosia has written several books on personnel management, one of which was published in August 2020, and Zosia signed an agreement on the transfer of copyrights for PLN 9,800 (the appropriate amount was transferred to her bank account). The other book was published in 2019, and the publisher paid Zosia a fee for the sale of copyrights (PLN 3185) in November 2020.
(5) Interest on the bank deposit was calculated and before tax it was PLN 260. The appropriate amount of tax was withdrawn from the bank account on December 31, 2020.
(6) Zosia spent PLN 2,000 on transport tickets to work in 2020, which is documented with monthly tickets issued for her, while Kate’s monthly tickets cost PLN 500.
(7) In September, Zosia sold a Volvo car for PLN 85,000, which she bought in January as an old-year model (produced in 2019) for PLN 75,000.
(8) In October, she received a refund of the insurance premium for the compulsory third-party liability insurance and voluntary Motor insurance of the sold Volvo PLN 4,250.
(9) Zosia won PLN 3,200 in the competition organized by radio, and PLN 2,000 in the lottery.
A. Please analyze all Zosia’s revenues/income in terms of tax obligations.
B. Please assume that Zosia is taxed as a single parent and calculate Zosia’s tax liability for 2020 (in PIT-37). Please skip social and health insurance contributions.
- Salary= 1050*12= 138000 PLN
2. Renting a flat= 2000 PLN (It can be taxed separately or with the other ones)
2.1. Calculate As cumulative:
2000*12=24000 PLN for the year.
2.2. Calculate separately: it can be the flat rate in this case we just consider a percentage of revenue and not the costs.
24000*8.5% = 2040 PLN
if the rental fee is more than 100,000 then the rate is 12.5%.
3. 8200 PLN cost of renovation of the house ( this can be reduced from rent revenue) : Rent income= 24000- 8200 = 15800
4. Depreciation of Apartment:
if you do not have the information about the value of the apartment, like this case, that she inherited, we have to use the value which is base for depreciation, which is 988 PLN per sqm. this can be used only for the purpose of depreciation.
so her depreciation= 100*988= 98800
we then multiply it with the rate of depreciation of the apartment which is 1.5%. then 1482 per year will be the depreciation of the apartment.
In case we have the value of the apartment, for example, it is 500000 pln, then the rate is the same which is 1.5%, then it will be 7500 PLN.
the value of 1.5% is the depreciation for the new apartment. if the apartment is more than 60 months old, (used apartment) then the depreciation rate can be no higher than 10%. so if this apartment is used, we can calcualte it 5%, 6% or 10% based on what we want. when you bought the apartment, the rate can not be changed later.
regarding commercial real estate, the rate of depreciation is 2.5 %. so we have three ways to calculate the depreciation. depending on if we know the value of the apartment or not.
so in this case, we use this value:
98800*1.5%= 1482 PLN is the depreciation cost.
3. books published:
transfer to bank account 2019: Not important for 2020 calculations
It is a special part-time contract. the tax for is calculated separately in this case.
Revenue 1: 9800 PLN
Cost= 50%*9800= 4900 PLN
Tax= 4900*19%= 931 PLN
Revenue 2= 3185
Cost: 50%*3185= 1592 PLN
Income= 1592 PLN
4. Interest on Bank:
the interest should be calculated separately.
before tax = 260 PLN
Tax= 19% * Interest= 49 PLN
5. Transport Ticket:
paid monthly ticket is 2000 PLN. this value is higher than 250 flat rate cost of the employee per month. as this value is below 250*12 (3000), then it is more profitable for her to not consider this cost.
so it is better to use the flat rate cost.
the cost of Kate (kid of Zosia) is not important in calculation of the tax.
6. sold a car:
it is a movable item and should be calculated together with the other taxes. remeber that if the car is owned not more than 6 month, the car is taxed.
as the car was more than 6 month owned by her, it is tax free.
7. in October she received a refund of premium car insurance with the value of 4250.
when she paid the premium to pay the company, it means that she used her money from pocket. so she already paid with the money that was already taxed. so there is no need to consider the tax for it.
8. competition by radio 3200 and lottery 2000
the award is taxed separately and is with the amount of 10%. we have tax free amount for this type of income as below for the two type of the awards.
Limitation for the tax-free range of the competition:
award by media ≤2000
Lottery ≤ 2280
tax to whistle blowers is tax free.
competition = 3200 and tax is 320
Lottery= 2000 and tax = 0 as it is ≤ 2280 PLN.
Now the total tax calculation value=
155958 is the total tax that she has to pay.
now for calculations of the annual calculation.
Tax basis= income-tax free rate= 155958
single parent → we have special scheme to calculate the tax liability. we divide the tax baisis by two. (either you have two or 10 kids).
so the tax basis= 77979
Now we have the tax free amount. the tax free amount is 525.
tax liability= after tax –525 =
Tax = (17% * 77979 )-525 =12731
And the tax of each person is then this value.
we multiply it by two ( no matter 2 kids or 100 kids)