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 rulings of the Provincial Administrative Court in Poznań on March 14, 2024, ref. no. I SA/Po 900/23 and the Provincial Administrative Court in Kraków of April 12, 2024, ref. no. I SA/Kr 202/24.
8.5% rate for IT – CURRENT KIS APPROACH
Short summary
We have already touched on the essence of the dispute both in our entries and in press publications:
Short summary
As a reminder – in IT an 8.5% rate will not be applied by thoseproviding services “related to software” or “related to 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);
Therefore, everything comes down to defining both concepts.
8.5% rate for IT – judgment of the Provincial Administrative Court in Poznań (I SA/Po 900/23)
In the Judgment of March 14, 2024, the Provincial Administrative Court in Pozań (I SA/Po 900/23) presented its view on this situation. The case concerned a taxpayer providing consulting services in the field of […] systems in terms of their implementation and maintenance, which he himself classified as PKWiU 62.02.30.0. KIS did not question this qualification. The services presented mainly included:
- Preparing an analysis of information collected from customers;
- Handling customer reports regarding errors found in the system or during the implementation of new functionalities, depending on the type of report;
- Preparing the collected information for the system to be implemented or improved;
- Describing customer requirements;
- Preparation of technical documentation;
- Configuration of systems based on customer requirements and prepared documentation in order to adapt standard processes […] to customer needs;
- System integration from the source or target system side, depending on the scenario, as well as the integration itself by configuring data flow in the integration bus provided by the company […]
- Support for the team responsible for conducting tests;
- Conducting workshops for clients.
The KIS concluded somewhat automatically that if activities qualify for grouping 62.02.30.0 PKWiU, then they constitute services “related to software consulting” – in other words, they qualify for a 12% rate. The court basically held that in such cases, the KIS cannot act automatically, and each case should be considered individually.
According to the Provincial Administrative Court, “it is important for the resolution of the case that the legislator distinguishes the concept of technical support services in the field of information technology and computer hardware from the concept of services related to consulting in the field of computer software. The complainant’s disputed services were classified as technical support services in the field of information technology and computer hardware, which is a separate classification unit than services related to consulting in the field of computer software. This type of classification precludes the recognition of the disputed services as services related to consultancy in the field of computer software under the PKWiU regulation. The above circumstance also confirms the validity of the claims in the complaint indicating the existence of a difference between the concepts of software and information technology.” According to the judgment, an 8.5% lump sum rate will apply in this situation.
Our commentary
This judgment is beneficial for people from the IT sector who have so far used or intended to use the 8.5% flat rate. Taxpayers are waiting for such decisions because it is the only way to obtain a slightly more individual approach to the issued interpretations. This is not the breakthrough taxpayers are hoping for. We do not have a clear definition of “software” here or a clearly defined boundary as to what activities are and are not “related to software consulting”. For such decisions, we will probably have to wait until the cases come before the Supreme Administrative Court.
However, it should also be considered whether in this particular case the taxpayer has correctly classified his services in the PKWiU and whether this factual situation corresponds to reality. Nevertheless, the attempt to define the concept of consulting undertaken in the discussed judgment may have beneficial effects for manual testers or people providing assistance and technical support services in IT.
8.5% rate for IT – judgment of the Provincial Administrative Court in Kraków (I SA/Kr 202/24)
In the Judgment of April 12, 2024, the Provincial Administrative Court in Kraków (I SA/Kr 202/24) presented another view on this situation. The case concerned a taxpayer providing services related to the design and development of information technologies for computer networks and systems (PKWiU 62.01.12.0). KIS did not question this qualification. The services presented mainly included:
- comprehensive analysis of IT systems;
- creating IT systems projects;
- creating analytical, operational and technical documentation for the created IT system components;
- creating specifications and defining business requirements for IT systems;
- design (creating functional concepts) of information system solutions;
- design and development of information technologies (computer networks and systems);
- developing new architectures of information systems and improving the current ones.
The Director of KIS once again somewhat automatically decided that if activities qualify for grouping 62.01.1 PKWiU, then they constitute services “related to software” 12% of the lump sum rate. The court criticized the fact that the authority did not attempt to explain the concept of “connection with software”, and therefore did not explain why these services were related to software.
According to the Provincial Administrative Court: “The statement contained in the interpretation that “services classified according to PKWiU 62.01.12.0 are related to software” is devoid of any justification and therefore arbitrary, which indicates that, in the opinion of the authority, all services marked with the above symbol are related to software. As indicated above, this is “true” only from the point of view of the explanations for the Classification. However, the Tax Act indicates that this connection should only be sought in relation to certain services related to the design and development of information technologies (ex PKWiU 62.01.1). Therefore, the conclusion that all these services are related to software is neither justified by the wording of the Act nor was it properly explained by the authority, although it involves the application of a higher tax rate of 12% instead of the rate of 8% expected by the taxpayer.“
Our commentary
This Judgment also does not clearly explain the definition of “software” or clearly define what activities are and what are not “software-related”. However, the key point here is that the court transferred this burden to KIS and considered the interpretations issued without any deeper analysis to be unjust, classifying all IT services as software-related.
8.5% rate for IT – 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.
