50% tax-deductible costs may be applied to the salaries of taxpayers-creators (performing creative activities), earning income from the transfer of copyrights to created works. Tax-deductible costs apply to both employment contract, contract of mandate and contract for work. The tax credit is addressed to, for example:
- IT professionals
By applying the allowance, the amount of advance income tax is reduced and the employee’s net salary is increased. Therefore, it is a very favorable form of taxation for creators.
For a long time, tax authorities have put up barriers for companies to apply royalties to employees. However, the scales of jurisprudence began to tilt in favor of the employees, and a landmark ruling was issued by the Supreme Administrative Court on September 7, 2021, under ref. II FSK 75/19. The ruling shows that:
- article 22(9)(3) of the PIT Law does not preclude the application of 50 percent of the costs to the honorarium, which is determined on the basis of a percentage of a specified portion of the salary proportionally attributable to the employee’s activities of a creative nature.
- the need to separate this remuneration in the employment contract itself is not justified by the wording of the PIT Law.
- the calculation of the author’s remuneration may also be based on the time spent by the employee to create an employee work, determined, for example, on the basis of records kept by the employer.
The Minister of Finance also issued a general interpretation favorable to taxpayers, No. DD3.8201.1.2018, on the application of 50 percent of costs to royalties. On the issue of the method of calculating the fee, the MF confirmed that setting the amount of the fee is within the contractual freedom of the parties to the contract, and no generally applicable laws regulate the rules for determining the amount of the fee. It is important that the fact of copyright income and its amount be properly documented, and this can be demonstrated by any legally admissible evidence. For example, the employer and the employee may keep records of the works created, including those works for which an advance royalty payment is applied. They may also document the creation of the work in the form of a written statement. The minister also allows for the possibility of setting a fee based on the time spent by the employee in preparing the work.
In order to implement 50% of the costs for creators, the company should put in place solutions for:
- documenting the works created by their employees,
- the method of determining the royalty,
- the provisions of labor contracts, salary regulations and other internal acts relating to 50% of costs, in terms of their compliance with the position of the tax authorities.