The continuing popularity of video games, combined with a well-developed IT market, means that the number of games offered, the related transactions, and consequently the overall market turnover, are constantly increasing. Digital distribution, virtual currencies, and in-game purchases, along with the ease of cross-border operations (including those based on dedicated platforms such as Steam or Epic Games), further support the growth of the gaming industry. The tax authorities’ interest in taxing income generated from these activities remains equally strong.
Games and game revenues
Depending on the category and structure of the product, games may take the form of:
- digital products;
- subscription-based services;
- tangible goods (e.g., physical copies on discs).
The above list is illustrative and covers only selected forms in which game-related products may exist. While transactions involving tangible goods are generally treated for tax purposes as goods transactions, the remaining ones are treated as services (or, in some cases, as transactions involving property rights — as recognized, for example, under the CIT Act).
Similarly, there are various ways to monetize games, including:
- one-time sales (e.g., an independent game offered on platforms such as Steam or Epic Games);
- subscription (e.g., access to an online game);
- in-game microtransactions offered under a free-to-play model;
- hybrid solutions combining SaaS and PaaS (game + game-hosting platform).
Each of these models may be subject to different tax treatment.
Place of taxation
Given the international nature of the gaming business, the first step is to determine where the revenue (or income) should be taxed.
Tax residents of a particular country are subject to taxation there on their worldwide income, regardless of where it is earned. For example, a Polish tax resident is subject to Polish income tax on all income earned, whether or not its source is located in Poland.
Individuals who are not tax residents of a given jurisdiction may still be taxed on income derived from sources within that jurisdiction. Domestic tax laws typically define what types of income are considered as sourced in a given country.
These general rules are supplemented by double taxation treaties (the application of which is usually subject to certain conditions). Such treaties may exclude a country’s right to tax (usually the source country), impose maximum withholding rates, or — most importantly — define mechanisms for avoiding double taxation.
Income tax in Poland
In Poland, the taxation of income is governed primarily by the following acts:
- the Corporate Income Tax Act (CIT);
- the Personal Income Tax Act (PIT), and
- the Act on Lump-Sum Income Tax on Certain Revenues Earned by Individuals.
For CIT taxpayers, income derived from games is generally subject to corporate income tax. Differences may arise, among other things, in the timing of income recognition.
As a rule, income from business activities arises on the date the goods are delivered, the property right is transferred, or the service is performed (or partially performed) — but not later than the date of issuing the invoice or receiving payment.
However, if the parties agree that the service is settled in accounting periods (thus referring to income classified as service-based, recognized periodically), the date of income recognition is the last day of the settlement period specified in the contract or on the invoice, at least once per year.
Finally, in cases where prepayments are collected for goods or services to be delivered in future reporting periods (and recorded using a cash register in accordance with VAT regulations), the taxpayer may recognize income on the date the payment is received.
For individuals (PIT taxpayers) who earn income from games as part of business activity, taxation can follow:
- the 19% flat-rate PIT, or
- general rules (progressive scale).
In some cases, simplified taxation methods may apply, such as lump-sum income tax (ryczałt) or a fixed-rate tax card.
In particular, lump-sum taxation may apply to income from:
- services related to the publication of computer game packages;
- reproduction of computer data carriers;,
- computer software downloaded from the Internet (excluding online access).
These types of revenues may be taxed at a 17% flat-rate PIT.
Additionally, for services involving the publishing of computer games classified under PKWiU 58.21.20.0 (“services related to publishing computer games downloaded from the Internet”), a lump-sum PIT rate of 8.5% may apply.
Summary
Video games can be a significant source of revenue, which is generally subject to taxation. Determining the appropriate tax treatment requires a multi-perspective analysis — including the nature of the product — and, in some cases, taxpayers may have some discretion in choosing the applicable taxation method.
