Forms of taxation of individual entrepreneurship in Poland
There are four forms of taxation of individual entrepreneurship in Poland:
Comparison of terms of taxation forms:
| Form / terms | Zasady ogólne / General, tax scale | Podatek liniowy / Line tax | Ryczałt od przychodów ewidencjonowanych / Unified (lump-sum) tax | Karta podatkowa / Tax card |
|---|---|---|---|---|
| Entrepreneurship activity | All | Certain activities are excluded (1) | For certain activities (2) | |
| Rate | 12% (3) | 19% | From 2% to 17% depending on the activity (4) | Depends on the type and volume of services, the population in the locality where the activity is carried out |
| Base | Revenues – expenses | Revenues (5) | Fixed, no relation to income | |
| Accounting | Book of revenues and expenses | Revenue Accounting | Accounting of invoices, maintaining personnel records when hiring employees | |
| Tax reporting | Tax return PIT-36 | Tax return PIT-28 | Tax return PIT-16A | |
| Reporting deadlines (6)(next tax year) | April 30 | February 28 | January 31 | |
| Advances / tax | Advances monthly or quarterly until the 20th day of the month following the billing period (month or quarter, respectively) (7), (8) | Payment of tax before the 7th day of the month following the month in which the tax card was issued | ||
| Application to form | When registering a business on the CEIDG-1 form | Attachment in PIT-16 form to tax card application | ||
| Change to another form (9) | Starting on the 20th day following the month in which the first income is received in a tax year | Until January 20 of the tax year on the PIT-16 form | ||
| Pluses | The right to tax benefits and credit; accounting of income together with a spouse; tax eligibility as a single parent | One tax rate; income does not affect the increase in the tax rate on income taxable according to the tax scale (from 12% to 32%); opportunity to deduct expenses | Possibility of low tax rates; simplified accounting | Low and uniform tax rate; no obligation to keep records; paid regardless of income received |
| Minuses | 32% rate for higher incomes; the obligation to keep a tax book of revenues and expenses | Not eligible for most tax benefits; no tax-free amount | Inability to deduct expenses, including those for investments; there are no tax benefits, settlements with a spouse, as a single parent, etc. | |
1. A single (lump-sum) tax on registered income does not apply to such activities as pharmacies, purchase and sale of currency values, trade in spare parts and accessories for motor vehicles, production of excisable products, also in the case of carrying out activities in the form of a partnership with a spouse. In addition, this form of taxation can be applied up to the receipt of income not exceeding 2,000,000 euros, in 2022 this limit is PLN 9,188,200.
2. The tax card is for certain activities such as retail, veterinary services, home care, tutoring and others.
3. Taxation on general principles is the taxation of income on a two-level scale of personal income tax.
| Base for tax | Threshold amount in PLN | Tax |
|---|---|---|
| Before | 120,000 | 12% – amount of non-taxable tax (PLN 3,600) |
| Above | 120,000 | PLN 10,800 + 32% from amounts over PLN 120,000 |
4. For example, 17% of the income received in the field of liberal professions;
5. Expenses in the form of losses can be applied to a number of incomes, for example, in the case of taxation of income from assets that are not included in fixed assets or are associated with income in the form of contractual penalties, exchange differences, interest on cash on current accounts, subsidies receiving free benefits. Expenses can be applied to subsequent tax years, but not longer than 3 years from the end of the tax year for which the right to reduce appeared.
6.Due to the possibility of changing the form of taxation during 2022, the deadline for submitting the annual tax return is expected to be extended until April 30, 2023. This right will apply to all taxpayers, regardless of whether they have changed the form of taxation.
Taxpayers who pay a line tax can change their tax form for 2022 by choosing a tax scale and completing Form PIT-36 instead of PIT-36L by April 30, 2023.
7.For general tax and line tax forms, the quarterly calculation method applies to taxpayers whose income in the previous tax year did not exceed 2 million euros (PLN 9,188,000 in 2022) and entrepreneurs starting their own business.
8.For the unified (lump-sum) tax on registered income, the quarterly calculation method applies to taxpayers whose income in the previous tax year did not exceed 200,000 euros (PLN 918,800 in 2022) and entrepreneurs starting their own business.
9.In 2022, it is possible to switch from the forms of a linear tax and a single (lump-sum) tax on registered income to a general taxation according to the tax scale during the year due to changes in the framework of the Polski Ład and Niskie Podatki programmes: a reduction in the tax rate in the first tax threshold from 17% to 12% (for the tax scale) and changes in health insurance contributions (for the linear and unified (lump) tax). It will be possible to change the form of taxation after the end of the year, in the tax return for 2022.
Entrepreneurs on a single (lump-sum) tax on registered income can also switch to general taxation according to the tax scale by submitting an application (declaration) from July 1 to August 22, 2022. This means that they will be able to tax income with a single tax for the first half of the year, and in the second six months - according to the tax scale.
Detailed information on the choice of the form of taxation is also presented on the website poradnikprzedsiebiorcy.pl.
Author: Natalia Grishchenko
30.07.2022
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