“How much do you earn” has at least two different answers in the Polish tax system, revenue (przychód) and income (dochód), and mixing up these two terms is one of the most common reasons sole traders (JDG) misjudge their tax bill or pick the wrong tax method. Here’s exactly where the line is and why it decides whether your flat-rate tax (ryczałt) actually pays off.
- Revenue (przychód) is everything that came in from the business before you subtract any costs, income (dochód) is revenue after subtracting deductible business costs.
- Flat-rate tax (ryczałt ewidencjonowany) is calculated on revenue, you don’t deduct costs at all, so low margins and high costs actually work against you.
- The progressive tax scale (12%/32%) and the flat 19% tax (podatek liniowy) are calculated on income, meaning costs genuinely lower your tax base.
- The definition of income comes from Art. 9(2) of the PIT Act: it’s the surplus of total revenue over the costs of earning it within the tax year.
- The health insurance contribution under ryczałt in 2026 depends on revenue across three brackets (up to PLN 60,000, up to PLN 300,000, above that), not on income the way it is under the scale or flat tax.
- This distinction is key when choosing a tax method: with high business costs, ryczałt can end up less favorable than it looks at first glance, despite the lower nominal rate.
- What revenue is
- What income is
- The difference in numbers, an example
- Which tax method is calculated on what
- How revenue and income affect the health contribution
- When ryczałt is less favorable than it looks
- Frequently asked questions
- Sources
What revenue is
Revenue from business activity, under Art. 14 of the PIT Act, consists of amounts due, even if not yet actually received, excluding the value of returned goods, discounts, and rebates granted. In practice, for a JDG, revenue is the sum of the invoices you issued (or amounts actually received, depending on your accounting method), before you deduct anything. If you issued invoices for PLN 20,000 in a given month, your revenue for that month is PLN 20,000, regardless of how much of that you spent on equipment, subscriptions, or subcontractors.
What income is
Income, under Art. 9(2) of the PIT Act, is the surplus of total revenue over the costs of earning it within the tax year. In other words: income = revenue minus deductible business costs. If that PLN 20,000 of revenue from the example above came with PLN 8,000 of costs (equipment, software, subcontractors, part of office costs), your income is PLN 12,000. It’s income, not revenue, that forms the tax base under the progressive scale and the flat tax.
The difference in numbers, an example
Example. Two developers running a JDG each invoice PLN 15,000 in revenue in a given month. Developer A works alone on his own laptop, his costs are PLN 500 a month (internet, accounting, part of subscriptions). Developer B runs a small team of subcontractors and rents an office, his costs are PLN 9,000 a month. Despite identical revenue, Developer A’s income is PLN 14,500, while Developer B’s is only PLN 6,000. Under the progressive scale or the flat tax, they’d pay completely different tax amounts despite the same revenue, because the base is income. Under ryczałt, they’d pay exactly the same tax, because ryczałt doesn’t see costs at all.
Which tax method is calculated on what
| Tax method | Tax base | Are costs deductible |
| Flat-rate tax (ryczałt) | Revenue, at a rate specific to the type of activity (e.g. 12%, 8.5%, 15%) | No |
| Progressive tax scale | Income (revenue minus costs), 12% up to PLN 120,000, 32% on the surplus | Yes |
| Flat tax (podatek liniowy) | Income (revenue minus costs), 19% rate | Yes |
The legal basis for ryczałt rates is Art. 12 of the Lump-Sum Income Tax Act, while the scale and flat tax rates come from Art. 27 and Art. 30c of the PIT Act respectively.
Ryczałt doesn’t see your costs at all. The scale and the flat tax always do, because they tax income, not revenue.
How revenue and income affect the health contribution
Under ryczałt, the health insurance contribution in 2026 depends on annual revenue, split into three brackets, at 9% of a base set as 60%, 100%, or 180% of the average wage for Q4 of the previous year, which in practice works out to specific monthly amounts: PLN 498.35 for revenue up to PLN 60,000 a year, PLN 830.58 for revenue between PLN 60,000 and PLN 300,000, and PLN 1,495.04 for revenue above PLN 300,000. Under the progressive scale and the flat tax, the health contribution is calculated differently, on income (at 9% and 4.9% respectively), so the same PLN 15,000 a month in revenue with high costs results in a lower health contribution under the flat tax than under ryczałt, because the flat tax sees actual income, while ryczałt only sees revenue.
When ryczałt is less favorable than it looks
A low ryczałt rate (say, 12% for software development services) looks attractive next to 19% flat tax or 32% under the scale, but that’s comparing nominal rates, not real burden. If your business costs are low (like Developer A above), ryczałt usually wins, because you pay a low percentage on revenue that’s nearly equal to income. If costs are high (a team, an office, equipment, subscriptions), ryczałt can end up more expensive than the flat tax, because you pay a percentage on the full revenue rather than on the much lower income the flat tax would actually tax.
Before settling on a specific tax method, it’s worth running the real scenario with your own numbers rather than just comparing nominal percentage rates. We cover the tax-bracket mechanism itself, and the point where switching methods starts to pay off, in more detail in our article on the second tax threshold. If you’re just starting a business and choosing a tax method from scratch, our overview of tax systems for sole traders is worth a look too, and if you’d rather not run these scenarios yourself every month, that’s exactly what MojaFirma’s accounting service handles.
Frequently asked questions
Is income the same as the amount left in your account after paying all bills?
Not always. Taxable income is calculated under PIT Act rules (revenue minus deductible business costs), while the actual cash left after paying all obligations, including ZUS contributions and the tax itself, can differ, because not every expense counts as a deductible cost.
Can I deduct any costs under ryczałt?
Not from the tax base, ryczałt is calculated on revenue without deducting business costs. You can, however, deduct paid health insurance contributions up to a set limit and some other reliefs, but not the business expenses themselves.
How do I check which tax method is better for me?
You need to run the real scenario with your own numbers: revenue, your actual business costs, and the health contribution amount under each method. The nominal percentage rate alone (12% ryczałt vs 19% flat tax) tells you nothing without accounting for costs.
Are revenue and income the same thing under an employment contract?
For an employment contract, people usually talk about gross and net pay rather than revenue and income in the business sense, though the PIT tax base there is also income, after deducting the standard costs allowed for employment income.
Bibliography and legal basis
- Act of 26 July 1991 on Personal Income Tax, Art. 9(2) (definition of income), Art. 14 (business revenue), Art. 27 (progressive tax scale), Art. 30c (flat tax).
- Act of 20 November 1998 on Lump-Sum Income Tax on Certain Revenue Earned by Individuals, Art. 6, Art. 12.
- Ministry of Finance, taxation under the progressive tax scale, podatki.gov.pl.
Legal status as of: September 28, 2026.
Author: Walery Kusznirski, in-house legal practitioner at MojaFirma.
This article is not legal or tax advice. Every situation is individual and depends on the specific business and its costs.
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