The retirement severance pay is exempt from tax pursuant to Art. 21 sec. 1 point 154 PIT act, i.e. as a part of a tax relief for senior citizens. The application of this exemption does not depend on whether the benefit paid is subject to social insurance, but on whether the employee earns income with social insurance.
On July 4, 2020, the employee acquired pension rights, but did not quit and continued to work until February 23, 2022. On December 30, 2021, he submitted a declaration of meeting the conditions for benefiting from the tax exemption. The workplace (the applicant) paid him a retirement severance pay on February 23, 2022, which was taxed. The employee’s income in 2022 did not exceed PLN 85,528.
The applicant asked the tax authority whether the retirement severance benefits from the personal income tax exemption as a part of the tax relief for a working senior citizen? Expressing his own opinion in the case, he stated that the payment of the retirement severance does not benefit from the aforementioned tax relief, as it is not subject to social insurance.
The tax authority found the applicant’s position incorrect. It noted that people who, despite reaching the general retirement age, are still professionally active and do not receive old-age and disability pensions, can benefit from the so-called tax relief for working senior citizens, effective from January 1, 2022 and applies to income earned from that date. The persons entitled to use it are women after the age of 60 and men after the age of 65, provided that they are subject to social insurance for obtaining exempted income.
This exemption is limited. It covers revenues in the amount not exceeding PLN 85,528 in the tax year. Moreover, in order to benefit from the tax exemption in question, the taxpayer cannot receive any old age / disability pension benefits despite acquiring entitlement. The payer may take this exemption into account after the employee submits a declaration that the conditions for its application have been met.
The application of the exemption in question does not depend on whether the benefit paid is subject to social insurance, but on whether the employee earns income, in this case from a work contract, that is subject to social insurance.
As a result, the authority concluded that the employee is entitled to benefit from the tax exemption. Therefore, the applicant should not have collected an advance on income tax on the benefit.