Amendments to Personal Income Tax law, tax exemptions, allowances and minimum wage in 2017

Amendments to PIT law

As of 1 January 2016, several amendments to the law “On personal income tax” (‘PIT law’) will enter into force.

Tax relief on catering expenses of employees

The current regulatory framework of the PIT Law provides that catering expenses are equated to the salary of employees if it can be apportioned (personalised) which results in an obligation to pay personal income tax (‘PIT’) and statutory social insurance contributions (‘SSI’). The purpose of implementation of the PIT relief is not to apply PIT on employer’s paid catering services not exceeding 480 euro annually for each employee (average 40 euro per month) set by a collective agreement. The planned tax relief will as additional benefit that will not be subject to the payroll tax (and SSI consequently). It will be applied if the employer will meet certain conditions listed in the Article 15, part 8 of the PIT law (e.g. the employer must employ at least 6 employees, the employer may not have tax debts exceeding 150 euro on 15 December of the previous year). A more detailed information on the application of the relief you will find in the article “Payroll tax relief staff catering servicespublished 14 September 2016.  

Payments from private pension funds

Currently, an individual can recover overpaid PIT of the eligible costs i.e., contributions to private pension funds during the tax period, regardless of whether contributions remain in the pension fund and how long. The amendments to the PIT law stipulates that if an individual – a member of pension plan contributes to a private pension plan in a tax year, but also receives payments from a pension plan during the tax year or the post-tax year, taxable income of an individual shall be increased by the difference of contributions paid and savings in the pension fund.

Additional tax exemptions related to dependent persons

Amendments to the PIT Law intends to extend the range of persons for which the person is entitled to apply the allowance for dependents. Hereafter the tax relief will be extended to a spouse off work, who has a custody of a child who is minor, disabled person, if the spouse off work does not receive taxable income or state pension.

Personal allowance

As of 2016, new rules for the calculation of non-taxable minimum have been  introduced, which states that the minimum monthly non-taxable allowance applies equally to all taxpayers, but the differential non-taxable minimum depends on the taxpayer’s annual taxable income and is applied by submitting the annual income declaration.

In 2017 taxpayer’s minimum monthly non-taxable allowance will be 60 euro to be applied at source, having submitted payroll tax book. In the coming years, the minimum monthly non-taxable allowance will decrease gradually: in 2018 – 40 euro, 2019 – 20 euro, while in 2020 it will be 0 euro.

Whereas differential non-taxable minimum will be applied once a year by submitting an annual income tax declaration and its amount will depend on the taxpayer’s annual taxable income in a tax year. Annual differentiated non-taxable minimum includes also the minimum monthly non-taxable allowance applied during the tax year.

First annual income tax declaration, where differential non-taxable minimum will be assessed, will be for year 2016. Taking into account the complexity of the calculation of differential non-taxable minimum and the risk to be understandable for all taxpayers, we hope that Electronic Declaration System of the State Revenue Service will be properly updated and will automatically recalculate the differential non-taxable minimum for each user.

Allowance for dependent

In year 2017 the allowance for each dependent remains unchanged, and it is 175 euros.

Minimum wage

In 2017 minimum monthly wage with normal working hours is 380 euros.

Calculation of a minimum hourly rate remains the same. It depends on the normal working hours in a particular month, thus it is determined on a monthly basis.

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