The second tax threshold - a problem affecting more and more Poles
In 2025, more than 2.4 million taxpayers in Poland crossed the second tax threshold and began paying 32% personal income tax (PIT). That is as many as 10 per cent of all people taxed under the tax scale - compared with just 3 per cent in 2022, when the threshold was raised to PLN 120,000. Roughly one in seven working people experienced a drastic fall in net pay at some point in the year - by as much as 24 per cent.
The problem will grow. Wages are rising by around 6 per cent a year, while the second tax threshold remains frozen. Finance Minister Andrzej Domański admits that there is no room in the budget to raise it. The president's pledge to veto new taxes paradoxically entrenches the current situation - the government is funding rising public spending precisely by freezing the thresholds and the tax-free allowance.
For many employees - IT specialists, lawyers, doctors or early-career professionals - this means a marginal tax rate of up to 47 per cent, and up to 57 per cent once employer contributions are included. This is the highest burden in the entire system, affecting people earning between PLN 12,700 and PLN 23,400 gross per month.
The pathology of the system: two tax worlds in one country
The real problem with the Polish tax system is not the level of the burden itself, but its glaring variation depending on the form of employment. Two people doing identical work - for example couriers at the same company or doctors in the same hospital - may bear completely different tax and contribution burdens. The only difference is whether a person works under an employment contract or runs a sole proprietorship (JDG).
An experienced specialist who sets up a JDG can reduce their marginal tax rate to just 18-25 per cent, by paying social insurance contributions based on the minimum wage and choosing the optimal form of taxation. By comparison, a colleague on an employment contract with a similar salary will pay more than twice as much. A system that was meant to support entrepreneurship has become a tool of mass tax optimisation.
The scale of the phenomenon is unprecedented. In 2025, there were already almost 1.7 million self-employed people in Poland (outside agriculture) - 250,000 more than in 2022. That is an increase of 18 per cent, while the total number of working people grew by only 3 per cent. At the same time, the number of self-employed people who employ others - that is, genuine entrepreneurs - fell by 3 per cent.
False self-employment - legal and tax consequences
Polish law has long recognised the concept of false self-employment, that is, a situation in which a person formally running a business actually performs work under conditions typical of an employment relationship. This phenomenon carries serious risks both for the businesses engaging such people and for the self-employed themselves.
The key legal risks include:
- Reclassification of the contract by an employment court or the Social Insurance Institution (ZUS) - from a B2B contract to an employment contract, resulting in an obligation to pay back-dated contributions with interest
- Fiscal criminal liability for incorrect tax settlements if the form of cooperation is challenged by the Polish Tax Office (urząd skarbowy)
- Loss of the right to preferential forms of taxation - including the flat tax and lump-sum taxation - if the business is found to be fictitious
- Tax-deductible costs - charging private expenses to the business is a tax offence and is subject to financial penalties
- Inspections by ZUS and the National Labour Inspectorate (PIP), which increasingly verify the authenticity of self-employment
Research by the economists Justyna Klejdysz and Tom Zawisza confirms that the introduction of the 19% flat tax for the self-employed in 2004 led to a mass move into JDGs among the top 2 per cent of earners. Seven years later, only 20 per cent of these new "entrepreneurs” employed anyone.
Planned reforms - what could change?
Successive governments have been planning to reform the system for over a decade, but none of the attempts has succeeded. The instruments considered included: a single levy, an entrepreneur test, equalising health contributions and increasing the powers of the PIP. Each of these initiatives was torpedoed by fears of allegedly damaging entrepreneurship.
Meanwhile, Poland's public spending in 2025 reached almost 51 per cent of GDP, placing our country sixth in the European Union - ahead of Sweden and Germany. Someone has to pay for this spending, and the current system means that the burden falls disproportionately on employees.
The discussion about raising the second tax threshold - although understandable from the perspective of those affected by the freeze - is therefore essentially a red herring. Without abolishing the tax and contribution privileges enjoyed by the falsely self-employed, no reform will restore coherence and fairness to the system.
How to safeguard your tax position
Whether you are an employee crossing the second threshold or a person running a sole proprietorship, the current situation calls for conscious management of your tax liabilities. Misclassifying the form of cooperation, settling costs incorrectly or ignoring the risks associated with false self-employment can lead to serious financial and legal consequences.
It is crucial to understand that tax optimisation has limits set by law. What seems a beneficial solution today may tomorrow become grounds for assessing back-dated contributions, interest and penalties. Both employers using the services of self-employed people and the self-employed themselves should regularly verify that their settlements comply with current regulations.
Do you need a professional analysis of your tax situation, or want to make sure your form of cooperation will not be challenged? Contact our firm. Our specialists in tax law and employment law will help you choose optimal and safe solutions, protecting you from the risk of inspections and unforeseen liabilities.
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