What is a tax credit?
A tax credit, according to the definition, is any kind of exemption, deduction, reduction or abatement that can lower the tax base or reduce the tax payable.
If you are therefore obliged to file a tax return, it is a good idea to find out whether any additional tax reliefs apply to you in addition to common reliefs, such as reliefs for social security contributions.
Types of tax relief
Below is a general, basic breakdown of tax credits:
reliefs related to the costs incurred by the taxpayer to earn income (e.g. reliefs from social security contributions),
allowances which are a reimbursement of the taxpayer's living expenses (e.g. relating to the rehabilitation of a disabled person),
family-related allowances (e.g. for raising children),
reliefs of a stimulative nature (e.g. for social donations or reliefs for start-ups),
reliefs seen as a technical exercise (e.g. reimbursement of unduly collected annuities).
In Poland, tax reliefs apply to personal income tax. They may be available to both self-employed persons and persons who are not engaged in such activities.
Generally, you can count on three types of deductions. One can be an allowance which is a deduction from the income you receive (e.g. social security contributions). Another relief consists of various tax deductions and the last one is the application of lower tax rates.
Tax exemptions
In your life, you may also encounter many situations that exempt you from paying personal income tax. We can divide these exemptions into subjective and objective. Subjective ones are mainly related to diplomatic or consular immunity.
Instead, we can divide the subject exemptions into the following groups:
social (e.g. family benefits)
compensation and business insurance related,
concerning certain work-related income,
concerning certain sales-related revenues,
concerning certain income of pensioners,
concerning per diems (e.g. employee business trips),
concerning certain revenue from capital and property rights
related to certain business activities,
concerning certain income earned abroad.
Would you like to take advantage of the reliefs or exemptions you are entitled to?
You may not know how to decide which exemptions or reliefs apply to you. To make the most of your rights, it's best to seek professional advice. And you can find such from a reliable accountancy firm.
We can advise you on how to come out ahead when settling your tax return. Find out what we can offer you and how we can help you. Feel free to contact our office.