Linear PIT 19%
— When Is It Worth It?
Linear PIT (flat 19% tax on business income) looks simple at first glance. But is it actually cheaper than the progressive scale (12%-32%)? The answer depends on your income level and family situation. I'll explain the break-even point, show you calculations, and help you decide which form works best for your business.
Linear vs. Progressive PIT: The Basics
Progressive scale (12%-32%):
- 12% on income up to 120,000 PLN/year
- 32% on income above 120,000 PLN
- Allows personal deductions and family reliefs
- Tax-free amount: 30,000 PLN/year
Linear PIT (19%):
- Flat 19% tax on all business income
- No tax-free amount
- No family deductions or child relief
- No health insurance deduction
- Simplified but less flexible
The Break-Even Point: ~120,000 PLN
Linear PIT starts becoming competitive around 120,000 PLN annual income. Below that, the progressive scale is usually cheaper. Above that, linear can save money.
Why?
- Below 120k: Progressive scale is 12% (lower than 19%)
- Above 120k: Progressive scale jumps to 32% (higher than 19%)
Calculation Examples
Example 1: Income 100,000 PLN
- Progressive: (100,000 – 30,000) × 12% = 8,400 PLN tax
- Linear: 100,000 × 19% = 19,000 PLN tax
- Winner: Progressive saves 10,600 PLN
Example 2: Income 200,000 PLN
- Progressive: (120,000 – 30,000) × 12% + (200,000 – 120,000) × 32% = 10,800 + 25,600 = 36,400 PLN
- Linear: 200,000 × 19% = 38,000 PLN
- Winner: Progressive saves 1,600 PLN
Example 3: Income 300,000 PLN
- Progressive: (120,000 – 30,000) × 12% + (300,000 – 120,000) × 32% = 10,800 + 57,600 = 68,400 PLN
- Linear: 300,000 × 19% = 57,000 PLN
- Winner: Linear saves 11,400 PLN
Key Restrictions on Linear PIT
No health insurance deduction:
On progressive scale, you can deduct health insurance (9%). Linear PIT doesn't allow this.
No family deductions:
- No child relief (up to 500+ PLN per month)
- No family relief (up to 1,500 PLN per month)
- No spousal deductions
No joint filing with spouse:
You must file separately, even if married. Can't benefit from spouse's deductions or reliefs.
Who Actually Benefits from Linear PIT?
- High-income entrepreneurs: 200k+ PLN/year
- Self-employed with no children: No family deductions to lose
- B2B contractors: Typically high income, minimal deductions
- Freelancers with irregular families: Can't use family reliefs anyway
When Linear PIT Is NOT Worth It
- Income under 120,000 PLN/year
- You have children (child relief is valuable)
- Spouse has lower income (joint filing saves money)
- You have health insurance you want to deduct
- You're in early business stages (usually lower income)
Frequently Asked Questions
Can I switch to linear PIT mid-year?
Yes, but it's complicated. You'd file two separate tax calculations and two different forms. Best to make the choice at year-start.
Is linear PIT mandatory above a certain income?
No, it's always voluntary. You choose which form to use.
What if my income varies year to year?
Consider your 3-year average. If you're usually above 200k, linear makes sense. If it fluctuates, progressive is safer.
Piotr helps entrepreneurs choose the right tax form and optimize their annual filings to minimize tax burden.