What taxation form should you choose when running a sole proprietorship in Poland? This is one of the most significant questions entrepreneurs face every year. The choice of taxation form directly impacts the personal income tax (PIT) and insurance contributions entrepreneurs pay. What factors are decisive? What should you focus on?
Entrepreneurs running a sole proprietorship can choose mainly from the following taxation forms:
• Progressive tax scale (tax rates: 12% and 32%),
• Flat tax rate (19%),
• Lump-sum of taxation.
Below, we summarize the key aspects of these taxation forms. But first, let’s discuss social security contributions (ZUS).
Social Security Contributions (ZUS)
Every entrepreneur running a sole proprietorship in Poland must pay ZUS contributions, which include:
- Social insurance contributions: retirement, disability, sickness (optional), and accident insurance.
- Health insurance contributions.
- Contributions to the Labor Fund (applicable to the full ZUS and Small ZUS Plus).
Only sickness insurance is voluntary; all other contributions are mandatory.
The amount of ZUS contributions changes annually or semi-annually, depending on increases in the minimum wage and the forecasted average salary. In 2024, the full ZUS contribution (including sickness insurance) amounts to 1,600.32 PLN/month, plus the health insurance contribution. In 2025, this will increase to 1,773.96 PLN/month, plus the health insurance contribution.
Key Note: Only the health insurance contribution amount depends on the chosen taxation form. New entrepreneurs can benefit from reduced ZUS contributions through programs such as “Start Relief,” “Preferential ZUS,” and later “Small ZUS Plus”. Those only applies to social insurance contributions!
It’s time to choose
Taxation Form: Progressive Tax Scale (General Rules)
The progressive tax scale is the default taxation form in Poland. If an entrepreneur does not select another taxation form, their income will automatically be taxed under this system.
Under this system, the tax is based on income, calculated as revenue from business activity minus the costs incurred to generate this revenue. Eligible business expenses include all expenditures made to earn or secure income sources.
• Tax rates: 12% up to an annual income of 120,000 PLN, and 32% for income exceeding this threshold.
• Tax-free amount: 30,000 PLN annually.
| Advantages of the Progressive Tax Scale: |
| • Joint filing with a spouse is possible. • Access to multiple tax deductions/reliefs (e.g., child tax relief, donation relief, R&D tax relief, IP BOX, and more). • Ability to deduct paid social security contributions from income.However, the health insurance contribution (9% of income, no less than 381.78 PLN/month) cannot be deducted. • Ability to deduct contributions to IKZE (Individual Retirement Security Accounts). • Option to deduct charitable donations, such as for religious purposes or supporting sports, culture, education, and science. • Possibility to declare income from various sources in a single tax return (though not all types of income apply). The progressive tax scale is often advantageous for entrepreneurs with relatively lower incomes. |
Progressive Tax Scale – Health Insurance Contribution
In 2024, the health insurance contribution for individuals taxed under the progressive scale is 9% of income, but it cannot be less than PLN 381.78 per month. Health insurance contributions are not deductible from tax. As a result, higher income leads to a higher health insurance contribution.
Important! A significant change to health insurance contribution rules is planned for 2026. A fixed-rate health insurance contribution will be reinstated for entrepreneurs using the progressive tax scale. This contribution will equal 9% of 75% of the minimum wage, estimated at PLN 310 per month in 2025. The contribution will be fixed and independent of the entrepreneur’s income. However, it will not be deductible from income or tax.
Taxation form – flat tax rate (19%)
The flat tax rate is fixed at 19%, regardless of the entrepreneur’s income level. Under this taxation form, the tax base is the income, calculated as the total revenue generated from business activity minus the costs of running the business.
When choosing the flat tax system, joint filing with a spouse is not allowed. Additionally, income earned from contracts of mandate or employment contracts cannot be taxed under the flat tax system. Opting for this system applies to all income from business activities, including income from sole proprietorships and partnerships that are not legal entities.
| Benefits of the flat tax rate |
| Stable tax rate (no progression). Entrepreneurs taxed under the flat tax system can utilize a narrower range of deductions compared to general tax rules. However, they can benefit from the IP Box relief, thermal modernization relief, R&D relief, and prototype relief. Ability to deduct contributions to IKZE (Individual Retirement Security Accounts). Ability to deduct social security contributions from income. Ability to deduct donations for religious activities or for purposes such as sports, culture, or supporting higher education and science. |
Flat tax rate – Health Insurance Contribution
The health insurance contribution for flat tax payers is 4.9% of income, but in 2024, it cannot be less than 381.78 PLN per month.
For 2024, taxpayers can reduce their tax base by the amount of paid health insurance contributions. However, this deduction is capped at 11,600 PLN. Entrepreneurs using the flat tax system can deduct health insurance contributions in two ways:
- By including the health insurance contribution as a business expense, or
- By deducting it directly from the tax base.
We discussed this topic (and it’s effects) in greater detail in our article:
Important! Significant changes to the calculation of health insurance contributions for flat tax payers are planned for 2026. These changes are expected to favorably impact the amount of health insurance contributions.
Taxation form – lump sum of taxation
lump sum on registered income is a simplified form of taxation for business activities. Tax rates for the lump sum method depend on the type of business conducted by the entrepreneur and range from 2% to 17%.
The taxable base for the lump sum taxation of registered income is the revenue generated after taking into account (just a few) applicable deductions.
The lump sum taxation method is frequently chosen by entrepreneurs operating in the IT sector. Depending on the tasks performed, IT professionals may opt for a 12% tax rate or a preferential 8.5% rate.
| Advantages of Lump Sum Taxation |
| Low tax rates: The applicable rate depends on the type of activity. Lump sum taxation can be advantageous for entrepreneurs who do not incur significant expenses related to their business activities since the cost of obtaining income is not considered in tax calculations. Simplified tax calculation. Lump sum taxation allows for maintaining a simplified income record (accounting). |
A comprehensive analysis of lump sum taxation, using IT entrepreneurs as an example, can be found here:
Mandatory taxation for private rental income: income derived from private rentals is obligatorily subject to lump sum taxation.
For income taxed on a lump sum basis, joint filing with a spouse is not permitted.
Important Note: Lump sum taxation is only available to entrepreneurs whose revenue in the previous tax year did not exceed the €2 million limit (calculated based on the average euro exchange rate announced by the National Bank of Poland on the first business day of October in the previous year).
Lump sum of taxation – Health Insurance Contribution
Under lump sum taxation, the health insurance contribution amount depends on the entrepreneur’s income and the average salary announced by the Central Statistical Office (GUS).
The health insurance contribution rate for entrepreneurs taxed under the lump sum method is 9% of the calculation base (indicator). This rate is tiered as follows:
Importantly, this is not a progressive contribution. Exceeding a threshold even late in the year necessitates retroactive payments for each prior month. Additionally, in 2024, the health insurance contribution cannot be deducted from taxes, though partial deduction from taxable income is possible.
Important note: Significant changes to how health insurance contributions are calculated for entrepreneurs opting for lump sum taxation are planned for 2026. These changes could positively affect the amount of the health insurance contribution.
When to Change the Taxation Form?
The deadline for changing the taxation form is the 20th day of the month following the month in which the first income of the tax year was earned. This means that most entrepreneurs must decide to change their taxation form by February 20, 2025. Individuals taxed under a flat tax card may change their taxation form by January 20, 2025.
Changes to the taxation form can be made online. Visit www.biznes.gov.pl and select the “Change data in CEIDG” option.
Important! Unfortunately, errors in CEIDG often occur when submitting a change in taxation form. After filing a request to change the taxation form, we advise downloading the UPO/UPP acknowledgment and confirming with the relevant tax office a few days later that the chosen taxation form is reflected in the system.
How can we help?
We support our clients through in-depth analysis of their situation and the preparation of relevant calculations. We assess the revenue and cost structure to recommend the most optimal taxation form, explore options for joint filing with a spouse, or identify applicable tax and ZUS reliefs. We assist clients in responding to tax changes that directly impact their tax liabilities.
To provide this service, we require a detailed description of the client’s situation as well as estimated revenue and costs. Using numerical data, we present the available options, enabling the client to choose the most suitable taxation form.
Our service always concludes with a personalized consultation — during this discussion, we clarify any doubts and explore strategies to mitigate tax risks.
Want to learn more? Contact us!
Marco D.
Very useful for a person who plans to set up a company in Poland. It’s a bit longer then the previous ones, but at least everything is in one place.
dr Piotr Sekulski
Thank you Marco, glad that we could help 🙂
John D.
An interesting article, allows you to understand the form of taxation and the differences in tax rates. I’m just wondering if I have better access to health care by paying more for health insurance?
dr Piotr Sekulski
Thank you, unfortunately it is the same contribution, only its amount differs depending on the chosen form of taxation.
Luka M.
Thank you for the information, that was really helpful. I’ve sent an e-mail with the description of my case and the numbers.
dr Piotr Sekulski
Thank you, we’ll try to answer later Today:)