Recently, the lump sum tax has become an attractive alternative for many entrepreneurs, especially in the IT sector. Due to numerous publications, some entrepreneurs have come to believe that if their services have any connection to the IT sector, they can pay a lump sum tax rate of 12% (and that many may even qualify for an 8.5% rate). However, this belief may be false, particularly for IT managers and management staff. In this article, we will try to guide IT managers and IT management staff on how to choose the appropriate lump sum tax rate.
What is a Lump Sum Tax?
In short, a lump sum tax represents a simplified form of income tax settlement, characterized by a high degree of informalization and essentially no possibility to deduct the cost of earning income.
Potentially, any type of services provided by individuals within business activities can be taxed at a lump sum rate (ranging from 2% to 17% of income tax). There are several exclusions and limitations that need to be checked because the application of the lump sum tax requires meeting certain conditions.
Which Lump Sum Tax Rate Should I Choose?
We have also addressed the topic of choosing the lump sum rate in one of our earlier posts:
IT Managers and IT Management Staff – Which Lump Sum Tax Rate?
To correctly assign the lump sum tax rate to the income from the services provided, one should refer to the Lump Sum Income Tax Act (direct link).
Lump Sum Income Tax Act – 12%
Article 12 section 1 indicates specific lump sum tax rates, assigning them to appropriate types of services/manufacturing activities. This division is made according to a key that, though controversial, must be adhered to.
Significantly, this division depends on the contract we have with the contractor, the PKD codes we have indicated, and the invoices we issue, but primarily on the actual activities we perform (which the tax office can easily check). Who can apply the 12% lump sum tax rate?
Article 12 section 1 point 2b letter b of the Lump Sum Income Tax Act:
2b) 12% of income from providing services related to:
(…)
b) hardware consultancy services (PKWiU 62.02.10.0),
software-related (PKWiU ex 62.01.1),
grouped as “Originals of computer software” (PKWiU 62.01.2),
software advisory (PKWiU ex 62.02),
software installation (PKWiU ex 62.09.20.0),
computer facilities management services (PKWiU 62.03.1);
Even a cursory analysis of the provision leads us to conclusion that activities such as product management, process management, project management, or team management are not included here. Therefore, not everyone whose services are related to IT can apply the 12% lump sum tax rate!
Lump Sum Income Tax Act – 8.5%
Article 12 section 1 point 5 letter a of the Lump Sum Income Tax Act:
5) 8,5%:
a) income from service activities, including income from catering activities in the sale of beverages with an alcohol content above 1.5%, excluding points 1-4 and 6-8;
For the 8.5% rate to be applicable, all other positions indicated in Article 12 must be excluded. This is where the 15% rate comes into play.
Lump Sum Income Tax Act – 15%
Article 12 section 1 point 2 letter m of the Lump Sum Income Tax Act:
15% of income from providing services:
of central offices (head office); management consulting services (PKWiU ex section 70), except for management consulting services related to the fish market (PKWiU 70.22.16.), other than those provided as part of liberal professions;
Thus, the 15% rate applies to the vaguely named management consulting services listed in PKWiU section 70.
IT Managers – Choosing the Appropriate PKWiU
The starting point for choosing the appropriate lump sum tax rate is undoubtedly the proper classification of the activities/services provided by the taxpayer according to the PKWiU 2008 nomenclature (since 2021, PKWiU 2015). This is important because tax regulations directly refer to these classifications.
Official GUS explanations regarding the analysis of specific PKWiU codes can be helpful in determining the PKWiU codes, available at this link.
For IT managers and management staff, the most important positions should be those from the PKWiU 70 grouping, found on pages 475-478 of this document. They include, among others:
- Strategic management consulting services;
- Financial management consulting services, excluding taxes;
- Human resource management consulting services;
- Business process management services;
- Other project management services, excluding construction projects.
As an example, let’s see the GUS explanation for the PKWiU 70.22.20.0 code, i.e., “project management services.”
PKWiU 70.22.20.0 Other project management services, except construction project management services
This grouping includes:
– coordination and supervision services regarding measures taken to prepare, launch, and complete a project carried out on behalf of the client,
– project management services that may involve budgeting, accounting and cost control, procurement, work schedule planning, and other operating conditions, subcontractor coordination, quality control, etc.,
– project management services, including office management, with or without the involvement of own personnel.
Choosing the correct lump sum tax rate is a difficult decision because it directly impacts the amount of tax we owe. Therefore, it is crucial to make this decision consciously, understanding all the consequences!
The decision on the tax rate pertains to the income from a specific service provided, not the taxation of all income from business activities. In other words, when providing different services, you need to choose the appropriate lump sum tax rate for each one!
What to Do in Case of Doubts?
If you have doubts regarding the PKWiU classification, you can always contact GUS (Central Statistical Office) to assign a classification symbol. You can do this here.
The cost of such an opinion from GUS depends on the number of symbols required, but it typically ranges from 60-200 PLN (recently we have a possibility of excemption). The waiting time for an opinion from GUS has recently extended from a month to even 12 months.
In this regard, we recommend using the services of a tax advisor, as a taxpayer acting alone can easily overlook certain formal aspects, which unfortunately can result in further delays by GUS.
What If I Choose the Wrong Lump Sum Tax Rate?
Unfortunately, in such a case, the tax office will likely indicate the appropriate (usually higher) lump sum tax rate during an audit. In some cases, this will require adjustments of advances and tax paid to the tax office (usually with a supplementary payment), often also with penalty interest and the need to submit corrected declarations and keep the PKPiR.
Lump Sum Tax – IT Managers/Management Staff – How Can We Help?
We support our clients by verifying the possibility of applying the lump sum tax in their activities and helping to choose the appropriate lump sum tax rate. This usually requires analyzing the B2B contract and the activities performed. We also prepare relevant calculations. During individual consultations, we explain all questions or doubts and discuss ways to minimize tax risks.
In more complex cases or if you want to use lower lump sum tax rates (e.g., 8.5%), we help with the proper analysis of the B2B contract, prepare an opinion for GUS, submit a request for interpretation to KIS, and indicate necessary changes to be made in CEIDG.
If you have any questions about applying the lump sum tax, visit www.outsourced.pl .
This is another post explaining the essence of the lump sum tax in the IT industry. Other publications will follow soon.
