Lump-sum taxation – is this the moment to change your PIT settlements?

As of 2021, the legislator decreased the rates of lump sum PIT. For most of the taxpayers, it was not enough to change their PIT settlement method. However Polish “Governance” Act may be a deal-breaker in this respect – due to the introduction of 4.9% health insurance contribution calculated on actual income effective burden rate of taxpayers subject to linear taxation will increase from 19% to 23.9%. On the other hand in the case of lump-sum taxpayers, health insurance contribution will be also charged as a lump sum and should not exceed PLN 1k monthly. This makes the lump sum method of settlements even more profitable. Moreover, revenues subject to lump-sum taxation are not subject to a 4% solidarity charge.

What is the difference in net revenues between these two methods of PIT taxation? We have assumed that the taxpayer currently subject to 19% linear PIT recognized monthly 5k PLN as tax-deductible costs and may opt to apply 17% lump-sum tax applicable for revenues from so-called professional services. Depending on the type of services rendered lower lump sum PIT rate may be applicable which would increase tax savings.

Below we present a comparison of net revenues, depending on the level of remuneration