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Tax-deductible expenses for authors – who is eligible?

by Michał Półtorak and Wiktoria Szczygieł

8 January 2025

The rules on applying tax-deductible expenses for authors (50% tax-deductible expenses) are set out in the Personal Income Tax Act [1]. Only taxpayers who meet specific criteria may claim 50% tax-deductible expenses. By claiming tax-deductible expenses for authors, employees can count on a higher net salary.

Only employees, i.e. individuals hired under employment contracts, may claim tax-deductible expenses for authors. The self-employed, i.e. individuals working under B2B contracts, cannot take advantage of the higher tax-deductible expenses.

Keep reading to find out what tax-deductible expenses for authors are, who may claim them and how to account for them.

TABLE OF CONTENTS

What are tax-deductible expenses for authors?
Who may claim 50% tax-deductible expenses?
Conditions for claiming tax-deductible expenses for authors
What is the limit of tax-deductible expenses for authors?
Tax-deductible expenses for authors and use of tax reliefs
Summary
Trust the experts

What are tax-deductible expenses for authors?

Tax-deductible expenses for authors are expenses related to the author’s income from the exercise of copyrights and the artist-performer’s income from the exercise or disposal of related rights [1a].

Who may claim 50% tax-deductible expenses?

50% tax-deductible expenses may be claimed by taxpayers who earn income from:

artistic activity in the area of architecture, interior architecture, landscape architecture, construction engineering, city planning, literature, arts, industrial design, music, photography, audio and audio-visual work, computer software, computer games, theatre, costume design, stage design, directing, choreography, artistic violin-making, folk art and journalism;
artistic activity in the field of acting, performing arts, dance and circus, as well as in the field of conducting, vocalism and instrumentalism;
audio and audio-visual production;
journalistic activity;
museological activities in the field of exhibition, science, popularisation, education and publishing;
conservation activities;
derivative right (in the meaning of the Copyright and Related Rights Act) to adapt someone else's work by translating it;
research and development activities, scientific activities, scientific and educational activities, research activities, research and educational activities and educational activities carried out at a university [1b].

Tax-deductible expenses for authors also apply to:

payment to an author for the transfer of his ownership of an invention, integrated circuit topography, utility model, industrial design, trademark or ornamental design [1c];
licence fee for the transfer of the right to use an invention, integrated circuit topography, utility model, industrial design, trademark or ornamental design, received in the first year of licence lifetime from the first entity with which the licence agreement was signed [1d].

Conditions for claiming tax-deductible expenses for authors

For many years, revenue authorities have issued very unfavourable advance tax rulings which practically disallowed authors to claim 50% tax-deductible expenses. The discrepancy between the positions of revenue authorities and administrative courts resulted in the Finance Minister issuing a general advance tax ruling [2]. The Finance Minister stated in that ruling that the following conditions must be met to claim 50% tax-deductible expenses for an employee:

Creation of a work

This is a key condition, as the mere performance of creative work by an employee is not sufficient for the application of tax-deductible expenses for authors. The employee's activities under the employment relationship should result in a work in the meaning of the Copyright Act, i.e. a product of the employee's work constituting a manifestation of creative activity of an individual character.

Disposal of a work

The employer must accept the work the employee has created, as this implies a statutory (or contractual) disposal of the copyright in that work to the employer.

Separate calculation of royalties

A mere statement by the employer and the employee that creative work has been done is insufficient. It is also insufficient if the contract of employment sets a percentage of the time to be spent on creative work. The employee's remuneration should be divided into royalties and other remuneration components.

Tax-deductible expenses for authors may apply only to the royalty portion of the remuneration and not to the entire income from employment.

The royalties may be paid in whole or in part before the creation of a work (as an advance payment). It is therefore possible to apply 50% tax-deductible expenses also to royalties paid for the month in which the employee is on holiday or sick leave.

This means that the parties to a contract may adopt any method for determining royalties. However, the agreed royalties should reflect the reality, i.e. the employee's actual involvement in the creation of works. The contract may either explicitly state the royalty amount or set the royalties as a percentage of the total remuneration, but in each option the royalties must be linked to a specific work (or a specific type of works).

Objective evidence confirming creation of a work

Another important element is correct recording of the working time the employee has spent on creative work. The general tax ruling quotes Article 180(1) of the Tax Act, according to which evidence may include everything that may help clarify the case and is not at variance with law. Therefore, just like in the case of royalties, there is no uniform template to be used to record creative work of employees.

What is the limit of tax-deductible expenses for authors?

The limit on tax-deductible expenses for authors refers to the maximum amount that a taxpayer can claim as 50% tax-deductible expenses.

In a tax year, the total value of 50% of tax-deductible expenses cannot exceed the upper limit of the first tax threshold, i.e. 120,000 zloty [1e].

It is worth noting the method of calculating tax-deductible expenses for authors. If an employee performs any of the creative tasks indicated in the PIT Act, the tax-deductible expenses for authors are calculated on the income reduced by social insurance contributions deducted in a given month. If an employee transfers invention rights or receives a licence fee for the use of an invention, the tax-deductible expenses are calculated on the resulting income.

If a taxpayer exceeds the limit of tax-deductible expenses for authors, he or she can no longer claim tax-deductible expenses in respect of any other income (e.g. the remaining income from employment or flat-rate expenses). This means that in such a situation no further expenses can be claimed as the taxpayer's allowable expenses when determining the tax advance.

Tax-deductible expenses for authors and use of tax reliefs

If a taxpayer uses tax reliefs (tax exemptions), he or she may take advantage of 50% tax-deductible expenses only in a limited scope due to the exemption amount. This refers to the following reliefs:

relief for the young – for persons up to the age of 26
relief for large families – for parents who raise at least 4 children
returnee relief – for those who transfer their tax residence to Poland
relief for working pensioners – for persons who have reached the retirement age and are eligible for pension but do not collect it and remain employed [1f].

Under the above-mentioned reliefs, taxpayers are entitled to a tax exemption of up to 85,528 zloty per tax year. Importantly, the reliefs may be claimed in combination with tax-deductible expenses for authors only up to an annual limit of 120,000 zloty in a tax year. This means that after reaching the relief limit, the taxpayer may still claim 50% tax-deductible expenses up to 34,472 zloty (PLN 120,000 - PLN 85,528).

Summary

To sum up, employers should consider applying tax-deductible expenses for authors because this may increase the net remuneration of employees performing creative work. This solution is becoming increasingly popular, especially in the IT industry, and may in some cases be an alternative to work under B2B contracts.

What is more, by starting to account for tax-deductible expenses for authors, an entity may increase its competitiveness on the market as it is then able to attract well-qualified employees.

Before an organisation introduces 50% tax-deductible expenses for its employees, it should, among other things, carry out a detailed analysis (to see whether the performed creative work leads to the creation of a work), adapt its internal systems to be able to record creative work correctly, and modify employment contracts (to separately include royalties).

Trust the experts

As the legislation is unclear, taxpayers find it often problematic to correctly recognise tax-deductible expenses. In such a case, it is worth using the help of experienced tax advisers. Our tax advisers offer comprehensive assistance with regard to income tax. We keep monitoring the rulings of revenue authorities and judgments of administrative courts.

Legislation:

[1] Personal Income Tax Act of 26 July 1991:

[1a] Article 22(9)(3)

[1b] Article 22(9b)

[1c] Article 22(9)(1)

[1d] Article 22(9)(2)

[1e] Article 22(9a)

[1f] Article 22(9aa)

[2] The Finance Minister's general advance tax ruling of 15 September 2020 (no. DD3.8201.1.2018) on how to apply 50% tax-deductible expenses in respect of royalties.