Poland’s Ministry of Finance has withdrawn several of the most controversial measures from a planned overhaul of personal and corporate income-tax rules. The revised proposal no longer includes a new 15% lump-sum tax for some service providers, tougher taxation of private rental income, restrictions on the housing tax exemption or an employment requirement for businesses using the IP Box regime.
Taxpayers who had been following Poland’s planned changes to the PIT, CIT and lump-sum tax systems may have received an unexpected reprieve.
The Ministry of Finance has significantly reduced the scope of a draft originally presented as an attempt to close tax loopholes and prevent aggressive optimisation. The latest version submitted to the Standing Committee of the Council of Ministers no longer contains several measures that had attracted strong criticism from entrepreneurs, tax advisers, landlords and technology professionals.
The abandoned proposals included higher tax rates for selected sole traders, a 17% rate on services supplied to related companies, stricter rules covering cars transferred to family members, new limitations on the housing tax exemption and conditions that would have made the IP Box preference unavailable to many self-employed programmers.
Although the revised draft still contains several technical and anti-avoidance provisions, it is substantially less restrictive than the version previously considered by the government.
No new 15% tax for service providers
One of the most controversial ideas concerned entrepreneurs using Poland’s lump-sum tax on recorded revenue.
Under the abandoned proposal, individuals providing services taxed at the standard 8.5% rate would have faced a 15% rate on annual revenue exceeding PLN 100,000 if they did not employ at least one full-time worker throughout the year.
The measure could have affected a broad group of self-employed professionals, including trainers, commercial agents, intermediaries, beauticians, personal trainers and some IT specialists.
Unlike the standard PIT system, the lump-sum regime taxes revenue rather than profit. Taxpayers cannot generally deduct business expenses before calculating the amount due. Increasing the rate from 8.5% to 15% would therefore have represented a substantial rise in the effective burden, particularly for businesses operating with relatively low margins.
The Finance Ministry argued that the existing system could be used for tax optimisation by individuals who formally operated as independent businesses while providing services in a manner resembling employment.
Critics responded that the proposed rule relied on an arbitrary revenue threshold and could penalise genuine sole traders simply because their businesses did not require employees.
The revised draft removes the proposal. Service providers currently applying the 8.5% rate will therefore not be automatically moved to a 15% rate after exceeding PLN 100,000 in revenue solely because they operate without staff.
Higher tax on services for related companies abandoned
The ministry has also withdrawn a proposal targeting services supplied to related entities.
The earlier version would have applied a 17% lump-sum rate when an entrepreneur provided services to a company or another entity with which the taxpayer had personal or capital links.
The change could have affected company shareholders who separately operate sole proprietorships and invoice their own businesses for management, consulting, marketing, IT or other professional services.
Finance Ministry officials viewed some of these arrangements as a way of replacing dividends, which are generally taxed at 19%, with service payments taxed at lower lump-sum rates.
The proposed 17% rate was intended to reduce the tax advantage associated with such transactions. However, it could also have covered legitimate services delivered at market prices to businesses in which the contractor held shares or participated in management decisions.
Removing the provision means that related-party services may continue to qualify for the existing rates applicable to the type of activity performed, including the 8.5% rate in eligible cases.
Transactions between related entities will still be subject to the general tax rules, including requirements concerning market pricing and the economic substance of the service.
Private rental rates to remain unchanged
Landlords have also avoided a proposed increase in the tax charged on higher rental revenue.
Private rental income in Poland is currently subject to lump-sum tax at:
- 8.5% on annual revenue of up to PLN 100,000;
- 12.5% on the portion exceeding PLN 100,000.
The abandoned plan would have increased the higher rate from 12.5% to 15%. The change was expected to apply both to private rental income and to selected rental activity conducted as part of a business.
The PLN 100,000 threshold would have remained unchanged, meaning that inflation and rising rents would gradually have pushed more landlords into the higher bracket.
The proposal could have increased the tax burden for owners of several properties, people renting expensive homes in major cities and businesses deriving significant revenue from leasing property or other assets.
The ministry has now removed the increase. The 12.5% rate on revenue above PLN 100,000 is expected to remain in place.
The decision does not eliminate all tax obligations for landlords. They must still calculate lump-sum tax on gross rental revenue, comply with payment deadlines and distinguish between amounts representing their own income and certain costs paid directly by tenants.
Self-employed programmers retain access to IP Box
Another important reversal concerns the IP Box regime, which allows qualifying income from intellectual property to be taxed at a preferential rate of 5%.
The relief is widely used by innovative companies and self-employed professionals who develop software, patents or other qualifying intellectual property while conducting research and development activity.
The Finance Ministry had proposed making access to IP Box conditional on employing at least three people. The requirement could have been met through employment contracts or selected civil-law arrangements, depending on the version of the proposal.
The restriction would have excluded many individuals who personally create software or other intellectual property but do not operate a larger organisation.
Self-employed programmers were particularly concerned. Many conduct genuine research and development activity independently, keep the required records and calculate qualifying income using the statutory nexus formula, but have no commercial reason to employ three additional people.
Critics argued that the number of employees did not determine whether a taxpayer was carrying out innovative work. They also warned that the measure could encourage artificial employment arrangements created solely to preserve access to the 5% rate.
The employment condition has now been removed from the draft. Businesses operating without staff may continue to use IP Box, provided that they satisfy the existing substantive and documentation requirements.
The reversal does not mean that every IT contractor automatically qualifies for the preference. Taxpayers must still demonstrate that they create, develop or improve qualifying intellectual property as part of research and development activity and maintain detailed records separating eligible income and costs.
Rules for cars donated to family members will not be tightened
The revised proposal also abandons a major change affecting company cars and vehicles bought out after leasing.
Under the current rules, an entrepreneur may transfer a vehicle to a close family member as a gift without generating PIT on the donation itself. The recipient may subsequently sell the car without paying PIT after the statutory six-month period, calculated from the end of the month in which the vehicle was acquired.
Close relatives may also benefit from an inheritance and gift-tax exemption, although higher-value donations generally have to be reported to the tax authority within the required period.
The Finance Ministry wanted to extend the period relevant to PIT from six months to three years. The proposed period was to be calculated from the end of the year in which the recipient obtained the vehicle.
As a result, a family member selling a donated former company or leased car after one year could have been required to report taxable income from the transaction.
The ministry presented the change as a measure targeting arrangements used to remove vehicles from business activity and sell them without income tax.
Opponents argued that the rule would also affect ordinary family donations and create a lengthy tax obligation for recipients who were not involved in the original business or leasing agreement.
The proposal has been withdrawn. The existing six-month rule is therefore expected to continue applying to sales of donated movable property, including qualifying vehicles.
Housing tax exemption remains available under existing rules
The government has also stepped back from restricting Poland’s housing tax exemption.
Under the current system, a person selling residential property before the end of the five-year tax period may avoid PIT if the proceeds are used for qualifying personal housing purposes within the statutory deadline.
Eligible expenditure can include purchasing a home, building or renovating a property and, under certain conditions, repaying a housing loan.
One of the proposed restrictions would have limited how frequently taxpayers could use the exemption. A person who had recently relied on the relief could have been prevented from using it again for another property transaction for three years.
Earlier versions of the reform also sought to narrow the interpretation of personal housing purposes, including by examining whether the taxpayer already owned another residential property.
The proposals caused concern among people who move homes because of family, employment or financial circumstances. A strict time limit could have resulted in tax being charged even where the proceeds from one property were genuinely reinvested in another home.
The revised draft no longer includes the restriction limiting use of the exemption to once every three years. The housing relief will remain available under the current framework, subject to the existing conditions concerning deadlines and qualifying expenditure.
Original reform was intended to close tax loopholes
The broader tax package was prepared as part of the Finance Ministry’s efforts to make the PIT and CIT systems more resistant to optimisation.
Officials had identified arrangements in which taxpayers could select favourable legal structures or transaction sequences to reduce the effective rate without significantly changing the economic substance of their activity.
The original reform covered not only lump-sum taxation, housing relief, IP Box and company vehicles but also depreciation, restructuring transactions, incentive programmes, minimum CIT and the tax treatment of related entities.
Business organisations and tax advisers criticised the scale of the package, arguing that some provisions went beyond targeting artificial arrangements and would instead increase taxes for taxpayers carrying out ordinary economic activity.
The latest version indicates that the ministry has accepted at least some of those objections.
It has removed not only the headline proposals affecting sole traders and landlords but also changes concerning the definition of a small CIT taxpayer, some depreciation rules, incentive programmes and parts of the regulations governing leasing and company transformations.
Some tax changes remain in the draft
The withdrawal of the most controversial proposals does not mean that the entire reform has been abandoned.
The project still includes technical and clarifying changes concerning several areas of the income-tax system.
Among the measures remaining are provisions related to the solidarity levy, taxation of shifted income and selected elements of the Estonian CIT system. The draft also addresses the treatment of dormant accounts and the tax consequences of redeeming certain bonds.
Some rules concerning tax-deductible depreciation for passenger cars may also remain, even though the separate proposal extending the tax period for vehicles donated to family members has been removed.
Taxpayers should therefore not assume that all provisions included in previous versions have disappeared. The final consequences will depend on the text approved by the government and subsequently adopted by parliament.
Revised proposal is not yet law
The latest version has been submitted to the Standing Committee of the Council of Ministers, an important stage of the government’s legislative process.
The committee may recommend further amendments before the draft is considered by the full Council of Ministers. Once approved by the government, the legislation must still pass through the Sejm and Senate and be submitted to the president.
Additional changes may therefore be introduced during both the governmental and parliamentary stages.
The remaining provisions are generally intended to enter into force on 1 January 2027, although individual measures may have separate transitional arrangements.
For taxpayers, the withdrawal of the planned increases provides greater certainty, but the legislative process should still be monitored until the final act is published.
A significant retreat by the Finance Ministry
The revised proposal represents a substantial change in the government’s approach.
The Finance Ministry initially presented the package as a broad attempt to tighten the system and increase the effectiveness of income taxation. Removing many of its central elements significantly reduces both its expected fiscal impact and the number of taxpayers directly affected.
Sole traders will avoid the automatic 15% rate linked to revenue and employment. Landlords will retain the 12.5% rate above PLN 100,000. Individuals working for related companies will not face the proposed 17% rate solely because of those links.
Independent innovators will remain able to use IP Box without employing three people, while taxpayers transferring cars to relatives will continue to rely on the existing six-month period. The housing exemption will also remain available without the proposed three-year limitation.
The decision will be welcomed by entrepreneurs and property owners, although it does not guarantee that similar proposals will not return in a future tax package.
For now, however, one of Poland’s most controversial planned tax reforms has been substantially reduced before reaching the final government approval stage.
