One of the most valuable features of running a sole trader business (JDG) in Poland under the progressive scale or flat tax method is the ability to deduct legitimate business expenses from your taxable income. Understanding which costs qualify — and how to document them correctly — can significantly reduce your annual tax liability.
The Golden Rule: What Makes a Cost Deductible?
Under Polish tax law, a business expense is deductible if it meets three criteria:
- It is incurred in order to generate revenue or to preserve and secure a revenue source
- It is not on the list of non-deductible expenses defined in the Income Tax Act
- It is properly documented — typically by an invoice (faktura VAT), receipt, or other legally recognised document
The burden of proof lies with the business owner. If the tax office challenges a deduction, you must be able to demonstrate the business purpose of the expense.
Common Deductible Expenses for Sole Traders
Office and Workspace Costs
If you rent a separate office or workspace, the full rental cost is deductible. If you work from home (praca zdalna), you can deduct a proportional share of rent or mortgage interest, utilities, and internet costs — calculated based on the percentage of your home used exclusively for business. Polish tax authorities typically accept a proportional calculation based on floor area.
Equipment and Technology
Computers, laptops, smartphones, tablets, printers, and other equipment used for business purposes are deductible. Equipment costing less than 10,000 PLN can be written off as a one-time cost in the year of purchase. Equipment above this threshold must be depreciated over its useful life (typically 2–5 years for IT equipment, longer for vehicles and machinery).
Software and Subscriptions
Business software licences, SaaS subscriptions, accounting software, cloud storage, and professional databases are fully deductible in the year of payment.
Vehicle Costs
Vehicle costs are subject to specific rules in Poland:
- Company-owned car used exclusively for business: 100% of costs deductible (fuel, insurance, repairs, depreciation), but you must maintain a detailed mileage log (ewidencja przebiegu pojazdu) and register the vehicle with the tax office on VAT-26 form.
- Private car used partly for business: 75% of costs deductible (for income tax), 50% of VAT reclaimable
- Electric cars: Full depreciation up to a value of 225,000 PLN; for combustion vehicles, the cap is 150,000 PLN
Professional Development
Training courses, conferences, professional books, online learning platforms, and professional membership fees related to your field of business are all deductible. Travel costs for attending training events (transport, accommodation, meals within per diem limits) are also deductible.
Insurance
Business liability insurance, professional indemnity insurance, and property insurance for business assets are deductible. Personal life insurance is generally not deductible as a business cost.
Marketing and Advertising
Website hosting, domain names, online advertising (Google Ads, social media), print materials, promotional items, and agency fees for marketing services are all deductible. Gifts to business partners and clients are deductible up to certain limits, provided they are not considered entertainment.
Accounting and Legal Fees
Fees paid to accountants (biuro rachunkowe), tax advisers, lawyers, and notaries for business-related matters are fully deductible.
ZUS Social Contributions
Social insurance contributions (retirement, disability, sickness, accident funds) paid by the sole trader are deductible as a business expense. Health insurance contributions are also partially deductible depending on your chosen tax method.
Travel and Business Trips
Business travel costs — flights, trains, accommodation — are deductible when the trip has a clear business purpose. You should keep documentation such as meeting confirmations, conference registrations, or client correspondence.
Expenses That Are NOT Deductible
Polish law specifically excludes certain costs:
- Fines and penalties imposed by public authorities
- Personal income tax payments and social contributions paid on behalf of employees in certain forms
- Business entertainment expenses (koszty reprezentacji) — including restaurant meals with clients
- Costs related to acquiring shares or stakes in other companies (capitalised separately)
- Provisions and reserves (with specific exceptions)
- Private expenses mixed with business expenses without clear business justification
Documentation: What You Need to Keep
For each deductible expense, you need appropriate documentation:
- VAT invoice — the standard document for B2B purchases
- Receipts with NIP — for purchases below 450 PLN (simplified invoices)
- Bank statements — to confirm payment
- Contracts and agreements — for ongoing services
- Mileage logs — for vehicle costs
The tax office can request documentation going back five years, so maintain organised records throughout this period.
Ryczałt Users: No Expense Deductions
If you have chosen the lump-sum ryczałt taxation method, you cannot deduct business expenses. Tax is calculated on gross revenue at your applicable ryczałt rate. This is why the ryczałt is typically only advantageous for businesses with very low costs.
See how deductions affect your tax bill: Use the Liczbnik.pl Tax Calculator to model your taxable income after costs and compare your liability under the progressive scale, flat tax, and ryczałt.