The “Polish Deal” will threaten the IT industry

The significance of the IT sector in Poland is increasing from year to year. In recent years, this industry has seen dynamic growth that is double the average of the entire Polish economy. Of key significance in shaping the Polish IT industry’s strong position on the international arena has been access to highly qualified staff and relatively low labour costs that are competitive, particularly when compared with countries in Western Europe. As a result, foreign investors established numerous software houses in Poland, and services provided by Polish programmers were in high demand.

This positive trend may soon halt due to planned tax changes. As part of the “Polish Deal”, the right to deduct a part of the health insurance contribution from personal income tax (PIT) will be abolished. As a result, this will increase PIT. At the same time, the amount of the health insurance contribution itself will increase, including for people working in the B2B model (self-employed individuals). The current lump sum, which is presently at PLN 381.81, will be replaced by a contribution calculated based on the entrepreneur’s actual income. In the latest draft version, this amount for people who apply the flat PIT rate has been reduced from 9% to 4.9%. The introduction of planned legislation will continue to mean a sharp increase in taxation and contributions for people providing services in the B2B model.

Junior Tax Specialist, Vistra Poland

The B2B model is widely used in the Polish IT industry and that is why the planned changes may have a very negative impact on this sector. The popularity of the B2B model in the IT sector is a derivative of many factors, including the high position of IT specialists on the labour market. The B2B model allows flexible cooperation with many companies. Tax considerations are also important – the possibility of using the flat PIT rate (19%) and the ever-popular IP Box, which allows a decrease of the tax obligation of some programmers from 19% to 5%. Programmers employed under employment contracts cannot use this solution.

A significant increase in the public-law burdens imposed on people working in the B2B model will raise the costs of running a business for a significant number of IT specialists. These individuals will certainly try to pass these costs on to their clients, increasing the prices of their services. Such clients are mostly IT companies and IT departments belonging to international corporations, as well as Polish IT companies that provide services to foreign entities. The element of international competition on the IT services market is of key significance here. An increase in public-law burdens will mean that foreign entities will no longer find it so enticing to keep software houses and IT departments in Poland. The use of services provided by Polish IT companies will also become less financially attractive. This may result in a significant weakening of the Polish IT industry’s competitive position on the international arena.

Doradca Podatkowy i Radca Prawny, Vistra Poland
Tax Advisor and Attorney-at-law, Vistra Poland

The planned legislation changes are the first suchsignificant increase in direct taxes to hit natural persons. The numerous changes implemented in the area of income tax in recent years mainly targeted international corporations, and the awareness and understanding of them by most citizens was low. Clearly, these changes did not bring about the desired affects, and so the government decided to compensate for insufficient corporate tax revenues with higher taxes on labour. The draft provisions may weaken the Polish IT industry and other sectors of the Polish economy in which competition takes places mainly in the international dimension. If this occurs, the “Polish Deal” will not result in the expected fiscal effects.


Vistra Poland

Last Updated on January 11, 2022 by Anastazja Lach