Poland: Increased tax-deductible costs for authors

In Poland, the standard amount that can be deducted from an employee’s revenue as a tax-deductible cost is PLN 250 or PLN 300 monthly, depending on where the employee lives. But there is a better option that can be applied to employees who receive income from transferring the copyrights to works they create to their employer.

Authors can apply the 50% tax-deductible cost to their revenue from disposing of the copyrights to their works ("50% TDC"). This option also applies to revenue from transferring other rights, such as industrial property rights. But for the sake of simplicity, here we only discuss copyright transfers. In the IT industry, 50% TDC are becoming a market standard, so in the following section we use such examples. Remember, though, that the 50% TDC can also be applied in other industries (e.g., publishing, journalism, R&D, etc.).

When can the 50% TDC be applied?

It is often assumed that to benefit from the 50% TDC an employee must perform creative work, though in fact this is not the only condition, and not all employees performing creative work can benefit from the 50% TDC. To apply the preferential 50% TDC, the following conditions must be satisfied jointly:

  1. The result of the employee's work must be protected by intellectual property rights, within the meaning of the Copyright and Related Rights Act (it must be a work) and at the same time it must be created in connection with the activities listed in the tax laws (inter alia, creative activities relating to computer programs, computer games, research and development).
  2. The employee must transfer the intellectual property rights to the work to the employer. The tax-deductible costs are determined in relation to the employee's remuneration for that transfer. The 50% TDC cannot be applied to revenue earned from performing other duties.
  3. The employer should keep evidence of how the copyrighted work was created.

Things to remember

The performance of creative activities itself is not sufficient to apply the 50% tax-deductible cost.

What does it mean that the result of work must constitute a work?

Pursuant to Article 1(1) of the Copyright Act, copyright applies to any manifestation of creative activity of an individual character, established in any form, regardless of the value, purpose and manner of its expression (work). What can constitute a work? For example, a computer program (or its part), an article, a document, or a graphic design.

Characteristics of a work

Man-made Manifestation of creative activity 
Individual character Fixed in any form


In the era of rapid development of artificial intelligence, it is important to be sure whether the result of work was created by an employee or by artificial intelligence, because in the latter case, the work will not qualify for the 50% TDC.

What does it mean that revenue should be earned from creative activities related to computer programs?

A taxpayer can only apply the 50% TDC to revenue earned from the activities listed in the PIT Act (The Act on the Personal Income Tax, Journal of Laws 2022, item 2647, as amended). IT-related activities include: creative activities relating to computer programs, computer games, audio and audio-visual creation, visual arts, as well as research and development activities.

At present, the tax authorities understand creative activity relating to computer programs very broadly as all activity related to using and disposing of copyrights to all works that are created in relation to software development. But please note that such a broad understanding of this (e.g., as covering also preparation of solution specifications) may change in the future. Therefore, creative activity includes not only programming, but also works created when developing a computer program, including:

  • source codes of computer programs, mobile and/or web applications,
  • system prototypes, databases and data structures,
  • websites,
  • technical documentation, specifications (including specifications of the architecture of the designed IT solutions),
  • scientific publications,
  • plans, analyses, reports and recommendations,
  • graphic designs (e.g. user interface), advertising and marketing materials, audio-visual materials, and presentations.

The table below lists the types of works that may or may not qualify as having been produced as part of software-related creative activity. These are general answers only; each specific factual situation requires a separate analysis.

Scope of work Does the result of the work constitute a work produced as part of creative software-related activity? 
Software development by adding new modules or functionalities
Development of automated test scenarios in the form of source code
Development of test scenarios for manual testers in the form of documentation
Performing automated or manual tests
Writing scripts in the form of source code following detailed step-by-step instructions
Conducting training sessions
Managing a project (product) team


How can an employee transfer copyrights to works?

In this regard, parties to an employment relationship may fall into a “tax trap" relating to the copyright in computer programs. This is particularly important for the IT industry.

Pursuant to Art. 74(3) of the Copyright Act, the economic rights to a computer program created by an employee are vested in the employer unless the employment contract provides otherwise. In other words, the employer acquires the author's economic rights at the time a work is created (primary acquisition), and those rights are not vested in the employee, even for a ‘juridical second’. According to the tax authorities, if Art. 74(3) of the Copyright Act applies, the employee has no rights they can transfer to their employer for consideration, so they cannot benefit from the 50% TDC.

Things to remember

Therefore, to be able to apply the 50% TDC for programmers, the employment contract must explicitly state that Art. 74(3) of the Copyright Act does not apply and that the economic copyright to any computer program the employee creates will be vested in the employee and then transferred to the employer to the extent agreed upon in the employment contract.

Most employers are not fully aware of the risks involved with the above. The standard that arises from Art. 74(3) of the Copyright Act is very beneficial to employers. Excluding it and reinstating copyright transfer based on contractual provisions opens up the possibility of errors being made or a court adopting a restrictive interpretation in the event of a dispute with an employee. The provisions of the Copyright Act also limit the scope of rights that can be transferred under a contract (e.g. Art. 41 of the Copyright Act). No such restrictions apply when the copyrights arise for the benefit of the employer under Art. 74(3) of the Copyright Act.

Especially with respect to employers belonging to US-owned corporate groups, employment contracts are sometimes signed with simple electronic signatures or by means other than handwritten signatures or qualified electronic signatures. This not only constitutes a violation of labour law, but may also affect the applicability of the 50% TDC.

Separation of royalties from other components of employee's remuneration

The 50% TDC applies only to the remuneration for transferring economic copyrights. The basis for calculating those costs is not the employee’s remuneration for work, but the remuneration agreed by the parties for the disposal of economic copyrights.

Things to remember

To apply the 50% TDC, in the employment contract the payment of royalties must be clearly separated from other components of the employee's remuneration.

Admittedly, neither case law nor tax law doctrine nor the legal provisions state how to do this properly. They do, however, point to several elements that should be considered when determining the amount of a royalty payment. For instance, the employer should separate the royalty from other remuneration components. The amount of the royalty may be based on the employment contract or other regulations applicable at the employer. However, it is not enough just to specify in the contract the percentage of time allocated to creative work or to determine this from time sheets. To apply the 50% TDC, the employment contract must contain provisions clearly separating the amount paid for transferring copyrights from other remuneration.

What experience shows

In practice, there are several methods of doing this. The method chosen should impose as small an administrative burden as possible on the employer (something to be discussed with the payroll department or payroll service provider) and should be adjusted to the actual value of the works produced by the employee in the employment relationship.

Every method has its advantages and disadvantages. For example, if there is a fixed monthly royalty payment that is separated from other remuneration, it is important to consider whether the amount is reasonable - not only at the time when it is agreed upon, but also in the future, taking into account possible changes in the employee's duties (promotion, a wider range of administrative and managerial tasks performed at the cost of creative work). If the remuneration for transferring copyrights is separated based on regular employee time sheets that differentiate the time spent on creative work from other duties, the employer has to collect and verify those time sheets.

With separate royalty payments, for tax purposes the employee receives revenue from two different sources: from the employment relationship (Art. 12 of the PIT Act) and from property rights (Art. 18 of the PIT Act). So, when processing the payroll for an employee benefiting from the 50% TDC, it is important to keep in mind the differences in the tax settlement of these two sources. For example, the tax exemption for persons under 26 years of age (‘PIT-0 for youth’) does not apply to revenue from property rights.

Remuneration from transferring property rights is also not considered remuneration for work from a labour law perspective, so it is important to consider whether the remuneration remaining after the separation of the royalty is higher than the minimum wage established by law.

Things to remember

Make sure that after separating the royalty payment the remuneration for work still meets the minimum wage requirement!

Evidencing the amount of a royalty to apply the 50% TDC

The amount of revenue obtained from copyrights or from the disposal of such rights must be properly evidenced. Pursuant to Art. 180(1) of the Tax Ordinance (The Act of 29 August 1997 - Tax Ordinance, Journal of Laws of 2022, item 2651, as amended), anything that can contribute to clarifying a matter and that is not against the law should be admitted as evidence. In practice, taxpayers usually prepare documentation based on three elements: time sheets, a list of the works produced (verified by a manager), and a repository of the works produced with access to the source files. Documentation that complies with the above should effectively prove that a given work was indeed created.

Limits for applying 50% TDC

The amount of tax preference is not unlimited. Pursuant to Article 22(9a) of the PIT Act, the amount of tax-deductible costs resulting from 50% TDC for authors cannot exceed the statutory limit (in 2023 the limit is PLN 120 000).

For employees who benefit from the 50% TDC for authors as well as youth tax relief, abolition tax relief, 4+ family tax relief and/or active seniors tax relief, the sum of:

  • the total 50% TDC and
  • revenue in the tax year exempt from tax under the above-mentioned forms of relief relating to the revenue obtained from a public service relationship, employment relationship, outwork or cooperative employment relationship,
    • cannot exceed the amount representing the upper limit of the first bracket of the tax scale (in 2023, this is PLN 120,000).

Risks to the employer’s from applying the 50% TDC

Employers tend to view the 50% TDC as a number of provisions in the employment contract that will result in a reduced tax burden and higher net salaries for employees. This is understandable, given that offering employees the 50% TDC is becoming a market standard (especially in the IT industry). But employers should be aware of the risks involved, and be ready to shoulder the significant administrative burden needed to apply the 50% TDC correctly. This includes:

  • the need to exclude the application of Art. 74(3) of the Copyright and Related Rights Act and the risks this entails (see above);
  • additional administrative duties for both employees (authors) and their supervisors (collecting and verifying reports on works created, determining whether the employee actually created a work within the scope of creative activity in the field of computer programs, etc.);
  • the possibility that, in the event of an audit, the tax authorities may adopt different views on the conditions for applying the 50% TDC. For example, regarding whether it can be applied to vacation pay, sick pay, bonuses, and so on; the permissibility of applying the 50% TDC to certain positions (e.g., project manager) or types of work (documenting the functionality of a computer program); the correctness of calculating the 50% TDC in a given month if the employee did not create a work or a part of one during that month;
  • a requirement to report the application of the 50% TDC as a tax scheme.

This is the English version of the article published in the guide on employment, mandate and specific works contracts in the leading Polish legal journal Dziennik Gazeta Prawna on 26 June 2023.

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