Higher flat-rate tax in 2026 - who will be hit by the increase?

Planned changes to the flat-rate tax - what is the Ministry of Finance proposing?

The Ministry of Finance has prepared a draft amendment to the personal income tax (PIT) and corporate income tax (CIT) acts and to the act on the flat-rate income tax, which may fundamentally change the way many Polish entrepreneurs are taxed. The main aim of the proposed provisions is to curb tax optimisation schemes in which the flat-rate tax (ryczałt) plays a key role. The government intends to introduce a revenue limit up to which the current preferential flat rates will continue to apply - once it is exceeded, the tax will rise significantly.

The draft provides for three significant changes affecting people who run a business. In addition to the revenue limit, the rules on rental are also to be tightened - and not only for real estate, but also for other assets. This means that existing, fully legal tax structures may lose their cost-effectiveness overnight.

It is worth stressing that the changes are not yet final - the draft is at the legislative stage, but the pace of work suggests that the new rules may come into force as early as 2026. For entrepreneurs using the flat-rate tax, this means they urgently need to analyse their tax position and, where necessary, adjust their settlement model.

Why does the government want to raise the flat-rate tax?

The origin of the planned changes lies in a widespread practice used by company partners. Instead of paying out a dividend subject to 19% income tax, entrepreneurs use legal structures that allow profit to be generated at the same time in both the company and its partners - with a much lower effective tax burden. The flat-rate tax on recorded revenue, with rates as low as 2% or 3%, was an attractive alternative within these structures.

The Ministry of Finance has concluded that such arrangements lead to an erosion of the tax base and breach the principle of tax fairness. The argument in favour of the changes is that entrepreneurs earning high revenue from cooperation with related entities pay disproportionately low taxes compared with employees on employment contracts or entrepreneurs taxed under the general rules.

At the same time, experts stress that the optimisation arrangements used to date were fully legal. Grzegorz Grochowina of KPMG in Poland points out that the proposed changes are in principle intended to limit abuse, but in practice will complicate the system more than simplify it. This is an important point, because one of the declared aims of the tax reform was precisely the simplification of tax settlements for entrepreneurs.

Who exactly will the new rules affect?

The scope of the planned changes is broad and covers not only entrepreneurs who knowingly used aggressive tax optimisation. Business organisations warn that the proposed regulation will affect "a wide range of entrepreneurs who maintain normal commercial relations with related entities". This means that businesses that never treated the flat-rate tax as an optimisation tool may also feel the consequences.

Groups of entrepreneurs most exposed to the increase

Based on an analysis of the draft amendment, the following groups should follow the legislative work particularly closely:

• Company partners who provide services to their own companies and settle revenue under the flat-rate tax
• IT entrepreneurs using low flat rates (e.g. 8.5% or 12%) while cooperating with related entities
• People earning rental income - from both real estate and movable property - previously taxed at the preferential 8.5% flat rate
• Entrepreneurs exceeding the new revenue limits, who until now have used the flat-rate tax without monetary limits affecting the rate
• Entities operating within holding structures, where flows between related entities make up a significant part of revenue

If you belong to any of the groups above, prompt consultation with a tax adviser can help you avoid unpleasant surprises once the new rules take effect.

Expert opinion - are the changes proportionate?

Opinions in the legal and tax community on the planned changes are far from enthusiastic. Experts point out that the proposed provisions amount to "excessive regulation" which will hit not only entities using aggressive optimisation, but also honest entrepreneurs running normal businesses.

The broad scope of affected entities under the new rules raises particular concerns. Instead of precisely targeting specific optimisation schemes, the legislator proposes general solutions that may lead to double taxation or a disproportionate increase in burdens for small and medium-sized businesses.

In addition, the new rules will certainly increase compliance costs - entrepreneurs will have to monitor their revenue more closely against the new limits, and analyse whether their relationships with counterparties meet the definition of related entities within the meaning of the amended provisions. For many smaller firms, this means having to use professional accounting or tax services, which generates additional costs of doing business.

How to prepare for changes to the flat-rate tax?

Although the final shape of the rules has not yet been settled, entrepreneurs using the flat-rate tax on recorded revenue should already take specific preparatory steps. A proactive approach will help you not only avoid negative financial consequences, but also identify potentially more favourable forms of taxation.

Recommended actions for entrepreneurs

First of all, it is worth carrying out a tax audit of your current settlement structure. You should analyse whether revenue from related entities could exceed the planned limits and what the effective tax rate will be after the changes. It is equally important to consider alternative forms of taxation - in some cases, switching to the 19% flat tax or even the progressive tax scale may prove more advantageous than a higher flat-rate tax.

You should also not forget about deadlines. Changing the form of taxation for a given tax year requires filing the relevant declaration by the 20th day of the month following the month in which the first revenue was earned, or by 20 February of that year. Missing the deadline means you cannot change for the entire tax year.

Do not wait for the new rules to take effect and surprise you with a higher tax bill. Contact our firm today - our tax law specialists will carry out a comprehensive analysis of your situation, identify the risks associated with the planned changes and propose the best solution tailored to the specifics of your business. An initial consultation will give you confidence that your finances are secure regardless of the direction of legislative change.