The income tax exemption for young workers, commonly called zero PIT (PIT – personal income tax), is a significant relief for people under 26 in Poland. Although the rule clearly brings financial benefits to young taxpayers, it does not apply universally. Many types of income remain outside the scope of the exemption, which can lead to misunderstandings and mistakes in tax settlements.
Correct classification of income is crucial – not all revenue earned by young workers can benefit from this preferential treatment. The legislator has precisely defined which categories of income are exempt and which remain within the standard tax system. Knowing these distinctions is essential both for young workers and for employers responsible for calculating tax correctly.
Legal basis of the PIT exemption for young people
The income tax exemption for young workers was introduced as part of a broader tax reform aimed at reducing the tax burden on this social group. According to the explanatory memorandum to the draft act, the main purpose of the changes was to reduce the tax wedge and make it easier for young people to enter the labour market.
The draft act implements the announced changes to personal income tax consisting in abolishing PIT for young people up to the age of 26. The aim of these changes is to reduce the tax burden on young people working under specific forms of employment
The rule is also meant to contribute to a higher labour force participation rate among young people and to lower unemployment in this age group. In addition, the legislator assumes that the exemption may encourage people working in the shadow economy to return to the legal labour market.
Under Article 21(1)(148) of the PIT Act, revenue from a service relationship, employment relationship, outwork, cooperative employment relationship, contracts of mandate (umowa zlecenia; Article 13(8)), graduate internships, student traineeships and maternity benefit received by the taxpayer before reaching the age of 26 is exempt from income tax, up to an amount not exceeding PLN 85,528.00 in the tax year.
This exemption is not merely subjective – it is both subjective and objective. Subjective, because it is addressed to taxpayers who have not reached the age of 26. Objective, because not all revenue earned by taxpayers of the specified age can benefit from the exemption
The wording of the provision shows that the legislator made the exemption conditional on meeting all the conditions set out in the provision together. These are sine qua non conditions for the exemption, which means that the absence of any of them prevents the taxpayer from using the tax preference.
Categories of income covered by the exemption
The literal wording of Article 21(1)(148) of the PIT Act precisely specifies which revenue can benefit from the exemption. The list is exhaustive, which means it cannot be interpreted broadly.
The exemption covers revenue from the following sources:
- Service relationship
- Employment relationship
- Outwork
- Cooperative employment relationship
- Contracts of mandate referred to in Article 13(8) of the PIT Act
- Graduate internship
- Student traineeship
- Maternity benefit
Revenue from a service relationship, employment relationship, outwork and cooperative employment relationship means all kinds of cash payments and the cash value of benefits in kind or their equivalents, regardless of the source of financing of these payments and benefits
Revenue from employment includes in particular basic salary, overtime pay, various allowances, bonuses, payment in lieu of unused holiday and all other amounts, regardless of whether their amount was fixed in advance. It also includes cash benefits paid on behalf of the employee and the value of other free or partly paid benefits.
| Type of revenue | PIT exemption | Legal basis | Notes |
|---|---|---|---|
| Employment relationship | Yes | Article 21(1)(148) | Up to PLN 85,528 a year |
| Contract of mandate | Yes | Article 21(1)(148) | With a business, Article 13(8) |
| Contract for specific work | No | - | Not in the provision |
| Business activity | No | - | Different source of revenue |
| Scholarships | No | Article 20(1) | Other sources; some scholarships have separate exemptions |
| Maternity benefit | Yes | Article 21(1)(148) | From 1 January 2022 |
All amounts received as allowances, bonuses or overtime pay will be exempt, provided they fall within the annual limit of PLN 85,528 and come from permitted sources.
Income excluded from the exemption
Although the PIT exemption for young people has a wide scope, there is a significant group of income that cannot benefit from this tax preference. The legislator deliberately limited the exemption to the most popular forms of work organised by the hiring party.
The exemption does not cover every kind of paid work, but only work performed under an employment relationship, cooperative employment relationship, outwork, service and a contract of mandate concluded with a business
The exemption does not cover revenue from the following sources:
- Contracts for specific work (umowa o dzieło)
- Business activity (self-employment)
- Scholarships
- Cash benefits from social insurance (except maternity benefit)
- Maintenance payments (alimony)
- Grants and subsidies
- Prizes and other free benefits not belonging to the specified categories
Under Article 10(1) of the PIT Act, sources of revenue are divided into various categories, including "other sources". This category covers revenue that has not been classified under the other sources listed in the provision.
A young entrepreneur running a JDG (sole proprietorship) in the IT sector cannot use the PIT exemption, even though he is under 26. His business income is taxed under the standard rules according to the chosen form of taxation – the tax scale (12% and 32%), the flat 19% tax (podatek liniowy) or the flat-rate tax on recorded revenue (ryczałt).
The phrase "in particular" in the definition of revenue from other sources shows that the definition is open. Revenue from other sources arises whenever the taxpayer obtains real economic benefits that cannot be assigned to another source listed in Article 10(1) of the PIT Act
Detailed analysis of exclusions from the exemption
Analysing the exclusions from the PIT exemption for young people requires a careful review of the individual categories of income that cannot benefit from this tax preference. Each of these categories has its own specific features and legal basis.
Contracts for specific work
Contracts for specific work are one of the most common forms of civil-law cooperation, but they are not covered by the PIT exemption for young people. Remuneration under a contract for specific work is taxed under the standard rules, regardless of the contractor's age.
The difference between a contract of mandate and a contract for specific work is crucial for applying the exemption:
- Contract of mandate – covered by the exemption (if concluded with a business)
- Contract for specific work – not covered by the exemption
Business activity
Young entrepreneurs running their own business cannot use the PIT exemption. This applies to all forms of taxation of business activity, including:
- Taxation under the tax scale
- Flat tax (19%)
- Flat-rate tax on recorded revenue
- Tax card (karta podatkowa)
Young entrepreneurs who have decided to run their own business cannot use the income tax exemption for people under 26. This applies to all forms of taxation of business activity and all types of business carried on
Scholarships and benefits
Scholarships, regardless of their source and purpose, are not covered by the PIT exemption for young people. They are classified as "other sources" and are taxed under the standard rules, unless they benefit from a separate exemption (e.g. scholarships under Article 21(1)(39) or (40b) of the PIT Act).
Similarly, most social insurance benefits are not exempt. The exception is maternity benefit, which was added to the catalogue of exempt income from 1 January 2022.
Conditions for applying the exemption
To use the PIT exemption for young people, all the conditions set out in the provision must be met together. The absence of any of them prevents the use of the tax preference.
Basic conditions for applying the exemption:
- Taxpayer's age – the revenue must be received before the taxpayer reaches the age of 26
- Type of revenue – it must come from the exhaustively listed sources
- Annual limit – revenue up to PLN 85,528 in the tax year is exempt, and the excess is taxed
- Form of engagement – it must comply with Article 13(8) (for contracts of mandate)
The legislator made the exemption conditional on meeting all the conditions set out in the provision together. These are sine qua non conditions for the exemption, which means they must all be met at the same time
Age criterion
The provision refers to revenue "received" before reaching the age of 26, so what matters is the date on which the revenue is received (paid), not the period it relates to. If the taxpayer turns 26 during the year, only revenue received up to the day they reach that age is exempt.
Revenue limit
The annual revenue limit is PLN 85,528 and covers total revenue from all sources covered by the exemption. It is a limit shared with the return relief, the relief for families with four or more children and the relief for working seniors (Article 21(44) of the PIT Act – the exemptions under Article 21(1)(148) and (152)–(154)). Once the limit is exceeded, the excess is taxed under the standard rules.
Type of contract of mandate
For contracts of mandate, the exemption applies only to contracts concluded with a business, as referred to in Article 13(8) of the PIT Act. It does not cover contracts of mandate concluded with private individuals who do not run a business.
Exemption for foreigners
Whether the PIT exemption applies to young foreigners working in Poland requires a detailed analysis of the rules on tax liability and of double tax treaties.
Under Article 3(1) of the PIT Act, individuals whose place of residence is in the territory of the Republic of Poland are liable to tax on all their income, regardless of where the sources of revenue are located.
A person resident in the territory of the Republic of Poland is an individual who has their centre of personal or economic interests in Poland or stays in Poland for more than 183 days in the tax year
Centre of personal and economic interests
The definition of the centre of interests is crucial for determining the tax liability of foreigners:
The centre of personal interests includes:
- Family home
- Family and social ties
- Social, political and cultural activity
- Membership of organisations and clubs
- Hobbies
The centre of economic interests includes:
- Place of gainful activity
- Sources of income
- Investments held
- Real and movable property
- Insurance policies
- Loans taken out
- Bank accounts
A Ukrainian citizen working in Poland under a contract of mandate, who is staying legally in Poland and has submitted a declaration that his centre of vital interests is in Poland, can use the PIT exemption for young people if he meets the other conditions (age under 26 and the revenue limit).
Double tax treaties
For Ukrainian citizens working in Poland, the Convention between the Republic of Poland and Ukraine for the avoidance of double taxation, signed in Kyiv on 12 January 1993, applies.
Under Article 4(1) of this convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax there by reason of domicile, residence, place of management or any other criterion of a similar nature.
Generally speaking, for remuneration paid to Ukrainian citizens employed under a contract of mandate who have submitted declarations that their centre of vital interests is in Poland, the payer must collect income tax advances under the general rules
At the same time, since the PIT rules apply to Ukrainian citizens in determining their taxation, Article 21(1)(148) of the PIT Act on the PIT exemption for young people applies accordingly.
Practical consequences of the exclusions
Excluding certain categories of income from the PIT exemption for young people has significant practical consequences both for taxpayers and for employers. Knowing these limits is key to planning your career and tax settlements correctly. Employees usually report this income in the return described in our guide PIT-37 step by step.
Consequences for young workers
Young workers should choose their form of work consciously, bearing in mind the possibility of using the tax exemption. Deciding to work under a contract for specific work instead of a contract of mandate may mean losing significant tax benefits.
For example, a young programmer earning PLN 5,000 a month (PLN 60,000 a year) can save about PLN 2,250 in tax a year if his contract qualifies for the exemption (employment contract in 2026: employee social security contributions of 13.71%, tax-deductible costs of PLN 250 a month, the 12% rate and the tax-reducing amount of PLN 3,600). For young entrepreneurs, whose business income is not covered by this exemption, we keep the KPiR or lump-sum records as part of our accounting services.
Consequences for employers
Employers must correctly classify the contracts they conclude and calculate tax properly. Applying the exemption incorrectly can lead to tax arrears and the payer's liability for uncollected tax (Article 30 of the Tax Ordinance Act (Ordynacja podatkowa)).
Employers, as tax payers (płatnik), are obliged to apply the rules on the PIT exemption for young people correctly. Applying the exemption incorrectly may result in the payer's liability for incorrectly calculated tax
Career planning
Young people planning their careers should take tax aspects into account when choosing forms of work. This is particularly important when:
- Choosing between a contract of mandate and a contract for specific work
- Deciding to start a business
- Planning additional sources of income
Changes in the rules and outlook
The rules on the PIT exemption for young people are gradually being modified. A significant change was the addition, from 1 January 2021, of revenue from graduate internships and student traineeships to the group of exempt revenue.
This change responded to labour market needs and the need to support young people in the transition from education to full employment. Graduate internships and student traineeships are an important part of professional development, and covering them with the exemption makes these forms of activity more attractive.
Possible directions of change
Looking at how the rules have evolved, further modifications can be expected in terms of:
- Extending the catalogue of exempt income
- Changing the annual revenue limit
- Adapting the rules to new forms of work
The legislator regularly analyses the effectiveness of the PIT exemption for young people and may introduce further changes to better adapt the rules to the realities of the labour market. However, any change must balance support for young people against budget revenue
Impact on the labour market
The PIT exemption for young people has a tangible impact on the labour market, especially in terms of:
- Making legal employment more attractive
- Reducing the shadow economy among young workers
- Improving the competitiveness of Polish employers
- Increasing the economic activity of young people
These were the legislator's assumptions – a reliable assessment of the actual impact of the exemption on young people's economic activity requires data from a longer observation period.
