Contracts for IT staff in Poland

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Jan 26, 10, 19:26 #1

Hi,
I am doing some research for my company as we may be setting up a small IT company in Poland.
I've been told by somebody that most IT companies offer a contract that allows for their "creative" work, e.g. development to be taxed at a lower rate. for example the contact would be split 70%creative /30% admin and the 70% is at a lower rate of tax.
It sounds like a bit of a scam to me. Have any members of the thread such a contract?
Thank you!

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Jan 26, 10, 23:33 #2

Yes it is a common practice in Poland. I have actually been working on such contract. The idea is that when you sign so called "umowa o dzieło" (a contract for a piece of work) it is assumed that your operating costs are 50% of the money you get. So out of each 10pln one earns only 5pln is taken as the base for counting income tax. This practice is legal as long as the work which was done was "creative" and is common in the IT.

Now about why do people mix the two contracts:
It is against the law not to pay social security for the permanent employees. For some reason which I don't remember and you should rather ask a lawyer about it - it is not possible to pay the social security with having just the "umowa o dzieło". That is why people sign two contracts with their employees. One is to cover their asses and pay social BS and the other is to minimize the taxes.

This is just an outline of the situation and you better ask someone who knows the law pretty well.

delphiandomineThreads: 40 Posts: 9,577 Joined: Nov 25, 08 ♂	Edited by: delphiandomine Jan 27, 10, 11:57 #3
gleite: Have a great view of the market in Poland. I don't think you do. For a start, you don't seem to know much about Polish social taxation and you seem to think that Poland is a great place to start a business.

dnzThreads: 25 Posts: 806 Joined: Dec 2, 07 ♂	Jan 27, 10, 12:02 #4
Register your company in the UK, It can be done online within 20 minutes, Tax is lower than in Poland and its also easier from a creative accounting point of view. Drop delphian a PM and i'm sure he can help if not I can also put you in touch with an excellent accountant who will point you in the right direction.

gleiteThreads: 9 Posts: 39 Joined: Jul 19, 08 ♂	Jan 29, 10, 11:12 #5
You are very strict! Sometimes you should be flexible pal. It is not that bad.

slainteThreads: 2 Posts: 1 Joined: Jan 26, 10 ♀	Feb 5, 10, 18:42 #6
thanks for replies :-)

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Feb 5, 10, 19:03 #7

slainte:

for example the contact would be split 70%creative /30% admin

The split you have mentioned is in the case of payroll contract with all that awful SS (ZUS) overhead.

You can however have your workers on:
- contract for specified work with clause of the transfer of author's economic rights (umowa o dzieło z przeniesieniem praw autorskich) - the whole pay is under 50% tax rebate.

- contract for specified work with a self-employed one-man-business - which is possibly the best for you; there is no tax rebate but on the other hand many costs could be deduced by the business owner, moreover new startups has 2-years vacation with 70% reduced SS overhead.

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Feb 5, 10, 19:32 #8

marqoz:

You can however have your workers on:
- contract for specified work with clause of the transfer of author's economic rights (umowa o dzieło z przeniesieniem praw autorskich) - the whole pay is under 50% tax rebate.

But be aware that these contracts shouldn't be used if the work is permanent - it's a minefield, and not a good idea to blindly issue such contracts if you aren't fully aware of the consequences.

marqoz:

- contract for specified work with a self-employed one-man-business - which is possibly the best for you; there is no tax rebate but on the other hand many costs could be deduced by the business owner, moreover new startups has 2-years vacation with 70% reduced SS overhead.

You won't employ many people on this basis - unless there's something in it for you. Full time staff are very unlikely to be swayed, unless the 800zl+ cost of social insurance is cheaper than paying it through a permanent contract. It's also got a very bad reputation in Poland - educated, decent staff are unlikely to agree. You should also be very aware that the tax office does have the power to declare this sort of agreement as invalid - and the fines usually amount 100% of unpaid (in their eyes) social insurance contributions, plus of course the contributions must be repaid too.

My recommendation is to compare the costs of hiring people in Ireland vs Poland on normal work contracts. If it works for you, then you can investigate ways of saving money - but don't assume that you can get away with hiring people on contracts of dubious legality.

♂

Feb 5, 10, 20:07 #9

Delphiandomine is right in most details but the most important is what is the strategy of your firm, slainte:

1) building a presence in Poland to expand your business here - to catch new contacts, clients, contracts and so on, or

2) just outsource some work to the Isle of Poland for some better terms-of-trade, or

3) start with 1 and see if 2 is possible, or

4) just make some appearances of the globality to be better sold by your company board to even more global company.

So if A=creative payroll, B= contract for specified work, C=self-employed employees, you have:
1 - A
2 - C
3 - A + support of B&C
4 - A (one secretary) + whatever

I hope it can help to develop your strategy ;-)

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