Advantages of quarterly tax settlement in the enterprise

Service-Tax

Tax settlements are among the basic obligations of an entrepreneur. In an average company, there are usually only two types of tax to be summed up - income tax (PIT) and goods and services tax (VAT). It does not seem like much, but as time goes by and the number of responsibilities increases, it may turn out that the monthly settlements begin to be onerous. At this point, it is worth considering an alternative, i.e. paying taxes on a quarterly basis. Check what are the advantages of quarterly tax settlement!

Advantages of quarterly tax filing

Why is it sometimes worth choosing quarterly income tax and VAT settlements? The first reason has already been indicated - this form means fewer contacts with the tax office and less formal burdens. VAT returns and income tax advances are regulated not twelve, but four times a year.

VAT should be accounted for:
- April 25 - for the first quarter,
- July 25 - for the second quarter,
- October 25 - for the third quarter,
- January 25 of the following tax year - for the fourth quarter.
As for income tax, the advance payment should be made to:
- April 20 - for the first quarter,
- July 20 - for the second quarter,
- 20 October - for the third quarter,
- January 20 of the following tax year - for the fourth quarter,
Less frequent settlements may also turn out to be a big plus in the event of making a mistake and the need to make corrections, especially in the case of VAT. It is worth remembering that if, for example, in September it turns out that a mistake was made in February disturbing the VAT settlement, it may be necessary to submit a correction from February onwards. When billing monthly, the taxpayer will be required to issue seven corrections (from February to August). However, if he chose the quarterly method, he will have to correct only two declarations - for the first and second quarter. Active VAT taxpayers, despite VAT settlements for quarterly periods, are obliged to send the JPK_V7K file containing the registration part each month, which, however, does not result in VAT payable. Staying on the subject of VAT, it is also worth noting that quarterly tax settlements give entrepreneurs a much longer period for deducting input tax. Pursuant to the regulations, the taxpayer has the right to do so in the period in which the tax obligation arose with the counterparty-seller, but not earlier than in which he received the invoice, or in one of the two following. Therefore, monthly settlements give a margin of three months - when we receive an invoice in January, we can deduct VAT in January, February and March. Quarterly settlements can take up to nine months for deductions - the invoice received in January can be settled in the context of VAT in the first, second and third quarter, i.e. until September.

Another advantage of settlements with the office on a quarterly basis is greater financial liquidity, especially important for small companies. Tax obligations are paid every three months, not every month, which gives you more flexibility in terms of spending planning. What's more, entrepreneurs who decide to settle VAT quarterly and have the status of a small taxpayer can often choose the more advantageous cash method. This form allows for the payment of tax due to the office only in the period in which the revenue was paid by the contractor. In this situation, contractors also do not have the right to withhold tax until they do not pay their liabilities, which may be an additional motive for timely settlements.

Who, how and when can choose quarterly settlements?

In quarterly periods, VAT can only be settled by small taxpayers, for which at least one year has passed from the moment of registration to VAT. The status of a small taxpayer is granted to all those whose sales during one tax year do not exceed the value of EUR 1.2 million, as regards income tax. Quarterly advances for income tax can be paid by any entrepreneur who has chosen this form of settlement.

The right of quarterly VAT settlement may not be used by taxpayers who:

  • they have just registered for VAT - for the first 12 months from registration for VAT, they cannot settle VAT on a quarterly basis, even if they use the cash method for VAT settlements;
  • in a given quarter or in the four preceding quarters, they delivered the goods referred to in Annex 15 to the Act, unless the total value of these deliveries did not exceed, in any month of these periods, the amount of PLN 50,000.

The advantages of quarterly tax settlements apply to taxpayers who notify the tax office of their choice in a timely manner. The entrepreneur informs about the decision to switch to quarterly income tax settlement after the end of the tax year in the annual PIT-36 or PIT-36L declaration.

When it comes to VAT, the information about the transition to quarterly settlement - using the VAT-R form - should be submitted by the 25th day of the second month of the quarter for which the quarterly declaration is to be submitted. Therefore, the decision should be made by:

  • February 25 to settle accounts for the first quarter,

  • May 25 to settle accounts for the second quarter,

  • August 25 to settle accounts for the third quarter,

  • November 25 to settle accounts for the fourth quarter.

Changing the tax settlement form to quarterly is not a complicated procedure - the most important thing is to meet the statutory deadlines. However, it may turn out that such a method will bring a lot of benefits to an entrepreneur managing a small company.