An 8.5% rate of lump-sum taxation for IT specialists has become a topic of significant interest to the tax authorities in recent months. Since February, we have encountered a series of unfavorable tax rulings regarding services classified under PKWiU codes 62.01.11.0 and 62.01.12.0. The first judgments from Provincial Administrative Courts (WSA) were also unfavorable for taxpayers. However, there is good news for taxpayers in such situations in the form of the latest ruling from WSA in Gdańsk dated May 9, 2023 (I SA/Gd 1399/22).
8.5% rate of lump-sum taxation – current KIS approach
The Essence of the Dispute
We have previously discussed the core of this dispute in our previous entries and in press publications:
A quick reminder
The 12% rate of lump-sum taxation applies to individuals providing services “related to software” or “software consulting.”
Article 12 par. 1 point 2b lit. b of the Act on lump-sum of taxation (…) 12% of revenues from the provision of services: (…)
b)(…) related to software (PKWiU ex 62.01.1), (…), related to software consulting (PKWiU ex 62.02), (…) , related to network and IT systems management (PKWiU 62.03.1);
Representatives of the IT sector who do not engage in activities directly related to software (e.g., IT system development, integrations, manual tests) have, until recently, considered applying the 8.5% flat rate. However, a few months ago, a series of negative tax rulings emerged in which the Director of KIS determined that practically every IT activity “is related to software.” This interpretation expanded the definition of “software” broadly, causing significant simplification and uncertainty. Furthermore, the Provincial Administrative Courts (WSA) upheld this interpretation in their initial judgments. But as it turns out, all hope is not lost.
Some positive changes
In the May 9, 2023, judgment, the Provincial Administrative Court in Gdańsk (I SA/Gd 1399/22) presented a different perspective. The case involved a taxpayer providing SEO and website design services, self-classified under PKWiU 62.01.11. KIS did not dispute this classification. The provided services primarily focused on website positioning and analytical activities, including analyzing user behavior and selecting optimal keywords for the portal. The results of these activities were then incorporated into the website’s content by the client using an editor or CMS system. The taxpayer did not perform these activities.
The KIS position and the Court’s Response
The KIS director automatically assumed that activities classified under PKWiU 62.01.11.0 qualified as “software-related” services and, thus, should be taxed at the 12% flat rate. However, the Court correctly noted that KIS cannot make automatic assumptions in such cases and that each case should be evaluated individually. It was emphasized that in this specific case, the PKWiU classification did not align well with the taxpayer’s situation. According to the Provincial Administrative Court, the applicant did not engage in activities falling under PKWiU 62.01.11.0 because he did not personally provide services “related to software.” Therefore, his activities do not qualify for the 12% lump-sum tax rate. While not explicitly stated in the judgment, it can be presumed that the 8.5% flat rate will apply in his situation.
WSA judgment – our commentary
This judgment is favorable for individuals in the IT sector who have been applying or intended to apply the 8.5% rate. Taxpayers have been eagerly awaiting such decisions as a means to challenge KIS’s approach and obtain more individualized interpretations. However, it’s important to note that this is not the breakthrough taxpayers have been hoping for. There is still no clear definition of “software,” and the distinction between “software-related” and “non-software-related” activities remains unclear. Clearer guidance may only emerge when these cases are heard by the Supreme Administrative Court. Nevertheless, there is a glimmer of hope.
8.5% rate of lump-sum taxation – our services
We support our clients by assessing the feasibility of implementing lump-sum taxation and help determine the appropriate tax rate. This often requires a thorough analysis of the B2B contract and the specific activities performed. We also provide detailed calculations. During individual consultations, we address any questions or concerns and discuss potential strategies for mitigating tax risks.
In more complex cases or when clients seek to utilize lower lump-sum tax rates (e.g., 8.5%), we assist in a comprehensive analysis of the B2B contract, prepare an opinion for the Central Statistical Office, file applications for tax rulings with KIS, and identify necessary adjustments to CEIDG.
If you have any questions regarding lump-sum taxation, please do not hesitate to contact us.
