This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Public debate has been dominated for some time by controversies surrounding Poland’s healthcare system. Reports frequently highlight exceptionally high earnings among doctors, with some annual incomes exceeding PLN 1 million (EUR 235,000). In a previous analysis of this professional group, I noted that doctors can benefit from a preferential taxation regime. This is particularly true for those settling their taxes under the lump-sum tax on registered revenue (PIT-28).
Explainer
A quick look at Polish PIT options
Poland uses a two-tier progressive tax system:
First threshold (up to 120,000 PLN annual income):
12% tax rate
Minus tax-free amount: 30,000 PLN annually
Second threshold (above 120,000 PLN annual income):
32% tax rate on income above 120,000 PLN (the 12% still applies to the first 120,000 PLN).
Several alternatives to standard PIT for entrepreneurs and certain situations:
1. Lump-sum tax:
For self-employed/sole proprietorsFixed percentage of revenue (not profit) based on business type, e.g. 17% for most professional services (IT, consulting, etc.)
No deduction of costs - you pay tax on gross revenue
2. Linear flat tax rate - 19%:
Flat 19% rate on all income regardless of amount
No tax-free amount
Can deduct business costs
Used by higher earners to avoid 32% rate
The analysis below explains how this tax mechanism works and the scale of the financial benefits doctors can gain from these preferential arrangements.
Interactive chart Tax simulations
How preferential is this system compared with other forms of taxation? I conducted a simulation covering the three main ways of settling personal income tax (PIT) and social security contributions.
First, I looked at the 14% lump-sum tax rate, which is available to doctors. I also included the 19% flat tax, a form of taxation that was a common choice among physicians before the 2022 changes. Finally, I compared these options with taxation under an employment contract. In the latter case, I treat revenue as the employer’s total labor cost – meaning gross salary plus the cost of mandatory contributions.
The chart above shows the combined tax and contribution wedge for these three forms of taxation at monthly revenue levels ranging from PLN 5,000 to PLN 150,000 (EUR 1,200–EUR 35,300). Due to the fixed-amount nature of social security (ZUS) and National Health Fund (NFZ) contributions around the minimum wage level, the wedge is lower for employment contracts. As income rises, however, this changes.
Once revenue reaches around PLN 9,000 (EUR 2,100) per month, the flat tax and lump-sum tax become more tax-efficient options. Up to approximately PLN 14,000–15,000 (EUR 3,300 – EUR 3,500) per month, the 19% flat tax remains more advantageous, while above that level the lump-sum regime results in lower overall burdens.
Even the sharp increase in the health insurance contribution under the lump-sum regime after exceeding PLN 300,000 (EUR 70,600) in annual revenue (or PLN 25,000 (EUR 5,900) per month) does not make the flat tax more attractive than the lump-sum option. At that point, the combined tax and contribution burden amounts to 26.1% and 25.7% of revenue, respectively.
These figures, however, depend on the costs that can be deducted under the flat-tax regime. In the simulation, I assumed that deductible business expenses amount to 10% of revenue, but no less than PLN 6,000 (EUR 1,400) and no more than PLN 50,000 (EUR 11,800).
Almost twice lower burden
The higher the revenue, the more advantageous the lump-sum regime becomes compared with the flat tax. This is the result of several factors.
First, once annual revenue exceeds PLN 300,000 (EUR 70,600), the health insurance contribution under the lump-sum regime becomes fixed. As a result, its share relative to revenue declines. Under the flat-tax system, by contrast, the contribution amounts to 4.9% of income, meaning it rises as income increases.
Second, the PIT rate under the lump-sum regime is lower (14%) than under the flat-tax system (19%). In addition, unlike the flat tax, the lump-sum regime is not subject to the solidarity levy (4% on income above PLN 1 million (EUR 235,000)).
As a result, for very high revenue levels (PLN 1.8 million (EUR 423,000) annually), the combined burden of taxes and contributions is almost twice as low: 16% under the lump-sum regime compared with 26% under the flat tax. It is also entirely incomparable with the burden imposed by an employment contract, where the rate reaches 42%.
The mechanics of the system
The table below compares the percentage burden imposed by these forms of taxation across five examples of high income levels, ranging from PLN 20,000 to PLN 150,000 (EUR 4,700 – EUR 35,300) per month.
Interactive chart In the case of an employment contract, it is important to note that social security contributions remain proportional until the so-called 30-times threshold (PLN 282,600 (EUR 66,500)). Only after this threshold is reached does their share relative to income begin to decline. However, the cap does not apply to contributions for sickness insurance, accident insurance, the Labor Fund, or the Solidarity Fund.
As a result, for an individual whose employer’s total labor cost amounts to PLN 1.8 million (EUR 423,000), these contributions are eight times higher than under contract-based arrangements.
The health insurance contribution is also highest for an employment contract (7.1%). It is slightly lower under the flat-tax regime (4.7%) and significantly lower under the lump-sum system (1%).
Personal income tax (PIT) also represents a larger share of revenue in the employment-contract model, due to taxpayers entering the second tax bracket with a 32% rate.
Almost PLN 500,000 lower in taxes and contributions
Percentages tell only part of the story. It is sometimes more revealing to look at the difference in taxation in absolute terms. One way to assess this is from the perspective of the loss to public finances, depending on whether a hospital hires a doctor under an employment contract or through a business-to-business contract – and whether that doctor settles taxes using the flat-tax system or the lump-sum regime.
Interactive chart For example, at revenue of around PLN 30,000 (EUR 7,100) per month, the total burden amounts to PLN 86,000 (EUR 20,200) under the flat-tax system, PLN 91,000 (EUR 21,400) under the lump-sum regime, and PLN 175,000 (EUR 41,200) under an employment contract. This means that the public finance sector may receive around PLN 90,000 (EUR 21,200) less in broadly defined taxes and contributions.
The actual benefit is somewhat smaller, as some contributions are linked to higher future benefits, such as pensions and sickness allowances.
However, the scale of lower burdens becomes striking when higher revenues are considered. The difference in taxation between the lump-sum regime and an employment contract at monthly revenues of PLN 50,000 (EUR 11,800) and PLN 150,000 (EUR 35,300) amounts to PLN 150,000 (EUR 35,300) and PLN 462,000 (EUR 108,700) per year, respectively.
In other words, for a salary package of PLN 1.8 million (EUR 423,000) financed from public funds, one must also account for an additional loss of nearly PLN 500,000 (EUR 117,600) in the form of lower taxes and social security contributions.