Publication date: January 10, 2024
In selected industries, employees can only pay tax on 50% of their income – new rules in Poland
In the case of Polish employees – IP creators, such as software developers, architects or engineers, “creative employees” of foreign companies have the privilege of paying income tax at the level of 50%. The idea is to stimulate the need to accelerate the development of industrial property in Poland, and the incentive for this is the preferential method of paying lower taxes, the basis of which is only half of the salary. This means that the second half of the salary is not subject to income tax. Polish tax offices are increasingly actively monitoring Polish employment contracts in software and engineering professions. A properly created employment contract template guarantees the legality of such a solution.
The practice of tax avoidance, which is permitted under Polish tax law and thus reducing the employee’s maintenance costs, is not precisely described in Polish regulations. This is a problem because incorrect definition of remuneration rules between the employee and the employer may cause problems with the tax office. The subject of copyright in Poland is only such creative activity that leads to the creation of a work benefiting from copyright protection; the creative activity itself cannot be the subject of copyright, and the employee’s privilege of paying income tax only on half of the income (50%) does not apply to the income obtained from this activity.
It is currently assumed – having in mind the standpoint expressed by the authorities (including tax authorities) that the safe use of the so-called “50% author’s fee option” requires the creation of three criteria in the work:
1) The first milestone is the creation of a work that is the subject of copyright under an employment relationship,
In short, in the case of an inspection with the Polish tax office, it is required to prove that during the employee’s work the employee created intellectual property, for example a building design or a computer program.
2) The second requirement is to have objective evidence confirming that the employee created a work that is the subject of copyright; the proof may be a statement by the employer and the employee stating that creative work has been performed, if it specifies what work was created.
However, the most important problem is the third one, namely the clear separation of the author’s fee from other components of the remuneration of the employee – the creator.
Therefore, the employer is obliged to DETERMINE, TOGETHER WITH THE EMPLOYEE, THE AMOUNT OF THE AUTHOR’S FEE and what exactly it is for. For example, in the case of copyright to a computer program, the moment of its acquisition by the employer is important. In the case of the so-called secondary acquisition of copyrights, the employer, when accepting a work (program) from an employee (programmer), is obliged to apply 50% to the remuneration paid in this respect (author’s fee) (costs of obtaining revenues).
Therefore, what is important in the employment contract is that the basic condition for applying 50 percent costs of obtaining income under an employment relationship is that the subject of the employment contract is the creation of a work within the meaning of the provisions of the Copyright Act, i.e. an original work of an individual nature ordered and expected by the employer, and in the case of an employee’s work it is necessary to accept this work by the employer, as this means statutory (or contractual) disposition of copyright in favor of the employer.
The employment contract should contain all the elements required by the Act and resulting from the general interpretation, i.e. a provision on the transfer of intellectual property rights and a specification of the fee. In addition to the employment contract itself, the issues of proprietary costs of obtaining income may be regulated by separate regulations, which would include, among others: rules for transferring and storing works created by employees. If the employment contract does not specify a royalty, the employee cannot apply the 50% fee on his own.