Self-employed individuals (sole proprietors) are increasingly receiving non-wage benefits from their contractors, similar to employee benefits. These may include health packages, sports cards, cafeteria platforms, group insurance, team-building trips, or holiday gifts. Tax regulations treat self-employed individuals differently from full-time employees, which leads to different tax reporting procedures for such benefits, often causing confusion.
In a previous post, I discussed the tax consequences from the perspective of the employer. Now, it’s time to look at the self-employed perspective – what obligations and tax consequences arise from the additional benefits they receive.
Income from Free of Charge Benefits in Business Activity
The general rule is that the value of benefits received for free or partially paid by a self-employed person is considered taxable income. This is directly stipulated in the Personal Income Tax (PIT) Act. According to Article 14, Section 2, Point 8 of the Act, income from business activity also includes the value of received in-kind benefits and other non-paid benefits (valued at market prices).
Receiving any bonus funded by a contractor (in any form) thus results in taxable income for the self-employed person when the benefit is received. Importantly, the company providing the money neither collects nor remits any tax advance, nor issues a PIT-11 form – the B2B model does not involve a typical withholding agent. The responsibility for tax reporting lies with the self-employed entrepreneur who receives the benefit.
Tax authorities confirm this position – for example, in an individual ruling of September 2, 2022 (ref. 0114-KDIP2-2.4011.544.2022.1.RK), the Director of KIS ruled that the value of benefits provided to a B2B collaborator constitutes income from their business activity, and the company passing the benefits does not act as the PIT payer. This means that the self-employed person must recognize the income and settle the tax themselves. It is not relevant that the benefit was not included in the invoice for services rendered. Even if benefits are not included in the agreement or invoice, they represent an in-kind gain related to the business activity, which is taxed in the same way as remuneration for services.
Monetary benefits (e.g., bonuses, additional payment made outside the invoice) are unequivocally treated as additional income from business activity. If a contractor pays the self-employed individual an amount of money (e.g., for private medical care or a holiday bonus), it should be added to the income of the business as any other payment for services. The self-employed person should record it in their books (e.g., in the tax book of revenues and expenses as additional income) and tax it according to their chosen form (progressive tax scale, flat 19% tax, or lump sum taxation on recorded income) – just like other revenues from issued invoices.
Non-monetary benefits (tangible items or services paid on behalf of the contractor) also generate income if they have a specific value and benefit for the recipient. For example, when a company provides the self-employed person with a sports card (e.g., a gym subscription worth PLN 140 gross), the recipient gains income equal to the amount paid on their behalf. Similarly, with a paid private medical care package, insurance policy (e.g., group life insurance), or top-ups in a cafeteria system, the amount financed by the contractor represents a financial gain for the business owner. These types of benefits are typically personalized, meaning a specific value can be attributed to a specific person. The conditions for recognizing income from a non-paid benefit are thus met – the taxpayer receives a measurable benefit that can be valued in money.
In practice, the self-employed individual should determine the market value of the received benefit (e.g., based on the company’s purchase price for the medical subscription or sports card) and add it to their income. An internal document can be created for this purpose, and some companies make this easier by providing monthly information about granted benefits and their values.
Representation Costs
From the perspective of the company providing the benefits, some expenses for self-employed individuals are classified as representation costs (e.g., inviting the contractor to a training or team-building trip). For the recipient, this means the benefit is not related to their contractual obligations but has a courteous nature. However, this does not change the fact that the recipient derives a financial benefit, which tax authorities and courts require to be taxed.
When Can a Benefit Be Tax-Neutral?
Despite the general rule of taxation, there are situations where receiving a benefit by the self-employed individual does not result in taxable income for PIT purposes. These cases include those where the benefit does not have a specific recipient or it is difficult to assign a measurable value to it. An example is open-ended integration events. If an entrepreneur is invited to an event (e.g., a Christmas party, company anniversary) where a wide range of people (e.g., all employees, contractors, employees’ families) can attend, and it is not possible to determine the individual cost assigned to a person, the benefit may be considered tax-neutral.
For instance, a team-building trip where the company purchases a specific package for each invited person (e.g., accommodation, meals, activities with a known unit price) can be recognized as taxable income for the contractor. However, a casual event where guests use a buffet and activities without a specified unit price can be defended as tax-neutral – there is no individual benefit in the legal tax sense.
Summary
The basic principle is that both monetary and non-monetary benefits received by self-employed individuals constitute taxable income. The main difference lies in how the tax base is determined. Special attention must be given to the fact that non-monetary benefits, although easily overlooked, are also subject to taxation, and their value should be properly assessed.
