How Programmers in Poland Can Benefit from 50% Tax-Deductible Costs
The below article is the updated and shorter version of a blog post we published 5 years ago.
In Poland, programmers and developers who create copyrighted works, such as computer programs, applications, or games, can benefit from a tax advantage known as the “50% tax-deductible costs” or “50% TDC.” This provision allows authors to deduct 50% of their income from the transfer or use of copyrights as tax-deductible expenses.
To qualify for the 50% TDC, several conditions must be met:
- The employee must create work protected by intellectual property rights, such as a computer program while performing activities listed in the tax laws (e.g., creative activities related to software development, research, and development).
- The employee must transfer the intellectual property rights to the work to the employer, and the 50% TDC applies to the remuneration received for this transfer.
- The employer must keep evidence of how the copyrighted work was created, such as a register of works, source code repositories, and documentation.
Proper Employment Contract Provisions
For programmers, the employment contract must explicitly state that Article 74(3) of the Copyright and Related Rights Act does not apply. This article grants the employer automatic acquisition of economic rights to computer programs created by employees. By excluding this article, programmers retain the copyrights and can then transfer them to the employer, enabling the application of the 50% TDC.
Separating the Royalty Payment
The employment contract should separate the royalty payment for transferring copyrights from other employee remuneration components. This can be achieved through various methods, such as:
- Specifying a fixed monthly royalty amount
- Calculating the royalty as a percentage of the overall remuneration
- Basing the royalty on the time spent on creative work (supported by timesheets)
Proper Documentation
Employers must maintain appropriate documentation to prove the creation of copyrighted works and the income earned from the transfer or use of copyrights. This can include:
- A register of works created
- Access to source code repositories
- Statements from the employee and employer detailing the created works
Limitations and Risks
The 50% TDC has an annual limit (PLN 120,000 in 2023) and cannot be combined with certain other tax reliefs beyond a specific threshold. Employers should also be aware of potential administrative burdens and risks, such as disputes with tax authorities over the applicability of the 50% TDC in specific cases.
By meeting the necessary conditions and maintaining proper documentation, programmers in Poland can benefit from the 50% TDC, resulting in higher net salaries. However, consulting with tax professionals and carefully reviewing the employment contract provisions and documentation requirements is essential.
