Simplified accounting - everything you need to know

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Simplified accounting can be used by natural persons, civil partnerships of natural persons, general partnerships of natural persons, partnerships and social cooperatives whose revenues from the sale of goods, products and financial operations for the previous financial year did not exceed EUR 2,000,000. In practice, this means that they can keep a revenue and expense ledger (KPiR). After exceeding this limit, simplified accounting is no longer possible, and the entrepreneur is obliged to keep full accounting.

Simplified accounting

The limit obliging to maintain the KPiR is converted at the average exchange rate announced by the National Bank of Poland on September 30 of the year preceding the financial year.

Small accounting obliges, above all, to run:

  • books of revenues and expenditures (when taxed according to the tax scale or with a flat tax) or

  • revenue records (with lump-sum taxation on recorded revenues).

In some cases, depending on the type of business, the entrepreneur will have to keep records. These are:

  • records of fixed assets,

  • equipment records,

  • vehicle mileage records (for PIT or VAT purposes),

  • VAT registers.

Simplified accounting - VAT registers

If the entrepreneur is an active VAT payer, he must keep a register of VAT purchases and sales. The form of keeping the register is not specified in the statutes in detail. It is important that it contains two basic groups of data:

  • contractors' data,

  • VAT figures, incl. tax base.

On the basis of VAT registers, the taxpayer completes settlement declarations - VAT-7 (in the case of monthly settlement) or VAT-7K (in the case of quarterly settlement). VAT settlement declarations must be completed and submitted by the 25th day of the month following the settlement period. As of 2018, declarations are sent only in electronic form. If the taxpayer needs it, he can keep several registers. The most basic form for domestic transactions is the register of sales and purchases of goods and services, for EU transactions, the register of intra-Community supplies and purchases of goods and services, and for foreign relations conducted outside the EU, the register of exports and imports of goods and services.

Simplified accounting - revenue and expense ledger

Entrepreneurs who keep a revenue and expense ledger (KPiR) pay tax on the income earned. Income is understood here as income less costs. Taxes can be paid on a straight-line basis (a flat rate of 19%) or according to general rules (18% and 32%). Tax is not paid if the business is underperforming. The KPiR should be established on the day of commencing business activity or on January 1 of a given tax year. The competent head of the tax office (due to the place of residence of the taxpayer) is informed about the establishment of the tax book of revenues and expenses within 20 days from the date of its establishment.

What the KPiR should look like is determined by the ordinance of the Minister of Finance on keeping the tax book of revenues and expenses. It must contain 17 columns. After the end of each month, summarize the values ​​in each of them.

Entrepreneurs keeping a tax book of revenues and expenses may recognize tax deductible costs based on one of two methods - simplified (formerly known as cash) or accrual. The accrual method is considered a bit more difficult and demanding. It should separate costs directly related to the revenue generated in a given year from indirect costs. The direct costs covering two tax years should be broken down into the years to which they relate.

Example 1.

How to account for an insurance policy covering two tax years?

Accrual method - costs should be divided and referred to the corresponding periods. The portion for the current tax year should be booked on the policy date, and the portion for the following year on January 1.

Simplified method - once on the date the cost is incurred, i.e. on the date the policy is issued.

Simplified accounting - a lump sum on recorded revenues

The registered lump sum is another form of tax payment, in which the entrepreneur pays the tax according to the rate specified for a given type of activity. The amount of tax is determined on the basis of the revenues earned. Costs are not taken into account. If the entrepreneur wants to settle with a lump sum from the beginning of his activity, he can mark it in the CEIDG-1 registration application. However, if in the course of the business he decides that he wants to change the form of taxation into a lump sum, he must submit a declaration to the head of the tax office by January 20 of a given calendar year at the latest.

The lump sum cannot be used by entrepreneurs who:

  • they run: a pharmacy, pawnshop, exchange office, activities in the field of buying and selling foreign exchange values, activities in the field of trade in parts and accessories for motor vehicles,

  • provide loans against collateral,

  • they run the company together with their spouse or the same type of business as the spouse,

  • they produce products subject to excise duty (with the exception of electricity from renewable energy sources),

  • perform freelance professions (with the exception of the profession of a doctor of all specialties, dental technician, medical assistant, midwife, nurse, translator and teacher in the provision of educational services consisting in giving lessons by the hour),

  • perform the services listed in Annex 2 to the Act on flat-rate income tax on certain revenues generated by natural persons (including advertising, financial intermediation, detective and security services, taking advertising and similar photographs),

  • they start their business independently or in the form of a partnership, if the taxpayer or at least one of the partners, before commencing business in the tax year or in the year preceding the tax year, performed activities falling within the scope of the taxpayer's or company activities under the employment relationship or a cooperative employment relationship,

  • are employed under a contract of employment and intend to conduct their own business and perform the same activities for the former or current employer in the last two tax years.

The amount of the lump sum depends on the type of business. There are six basic rates: 20%, 17%, 8.5%, 5.5%, 3%, and 2%. It may happen that the entrepreneur will settle the lump sum on the basis of several rates, if his activity is diverse.

Simplified accounting - records of fixed assets and intangible assets

Taxpayers keeping the KPiR are additionally obliged to keep records of fixed assets, and entrepreneurs on a lump-sum basis to keep a list of fixed assets and intangible assets.

A fixed asset is considered to be complete and fit for use: machines, tools, structures, means of transport, with an estimated period of use longer than one year, used by the taxpayer for the purposes related to his business activity. Pursuant to the Personal Income Tax Act, the obligation to enter a fixed asset in the register occurs when its initial value exceeds PLN 10,000.A cheaper purchase can be booked directly in the costs in the month of commissioning or entered into fixed assets with one-time depreciation. It is worth noting that not all fixed assets are depreciated.

These include:

  • land and perpetual usufruct rights to land,

  • residential buildings with cranes located in them or residential premises used for business activity or leased or rented under a contract, if the taxpayer does not decide to depreciate them,

  • works of art and museum exhibits,

  • goodwill, if this value was created in a different way than specified in art. 22b paragraph. 2 point 1,

  • assets that are not used as a result of suspension of business activities under the provisions on suspension of business activities or cessation of activities in which these items were used; in this case, these components are not depreciated from the month following the month in which the activity was suspended or discontinued

For the proper keeping of records of fixed assets, it is important to determine the initial value of a fixed asset. Entries in the register of fixed assets are made on the basis of documents which show the initial value of the recorded assets. In turn, the register of fixed assets itself should contain at least:

  • ordinal number,

  • date of purchase,

  • date of acceptance for use,

  • specification of the document confirming the acquisition,

  • determination of a fixed asset or intangible and legal value,

  • symbol of the Classification of Fixed Assets,

  • initial value,

  • depreciation rate,

  • the amount of the depreciation write-off for a given tax year and cumulatively for the period of these write-offs, including when the asset was ever entered into the register (list), then removed from it and re-entered,

  • updated initial value,

  • the updated amount of depreciation,

  • upgrade value that increases the starting value

  • the date of liquidation and its reason or date of disposal.

It is worth noting that the entrepreneur should include a given fixed asset in the records in the month of putting it into use, this rule also applies to assets that the entrepreneur has produced himself, as well as those leased or rented.

As for the form of fixed assets register, you can buy ready-made forms for self-completion. You can also keep records on the computer and print sheets. It is also allowed to keep records in a notebook manually.

Lump sum taxpayers should also document the fixed assets used. To this end, they must keep an inventory of fixed assets and intangible assets. The method of keeping the aforementioned records does not differ from that used by entrepreneurs keeping KPiR.

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Simplified accounting - equipment inventory

In the inventory of equipment, entrepreneurs include tangible assets that are related to the activity, but do not meet the criteria for recognizing them as fixed assets. Importantly, the value of the equipment elements fluctuates between PLN 1,500 and PLN 10,000. The planned duration of their use must be less than one year. Assets whose value does not exceed PLN 1,500 do not have to be entered in the register. When keeping records of equipment, care should be taken that the same assets are not also entered into the records of fixed assets.

As in the case of the register of fixed assets, there is no imposed one model for keeping the register of equipment. Most entrepreneurs, however, keep the form of a table, for the sake of transparency. You can use ready-made patterns or create your own. It is important that the records contain at least the data required by the regulations, that is:

  • consecutive number of the entry,

  • date of purchase,

  • invoice or bill number,

  • equipment name,

  • purchase price of equipment or production cost,

  • date of liquidation / sale / donation,

  • the reason for the liquidation.

Both entrepreneurs keeping the KPiR and revenue records are obliged to keep records of equipment.

Simplified accounting - VAT vehicle mileage records

Vehicle mileage records for VAT purposes are kept by active VAT taxpayers who want to deduct 100% VAT from expenses related to the use of the vehicle (e.g. a passenger car). However, in order to be able to take advantage of the right to a full VAT deduction, the entrepreneur must report the vehicle to the Tax Office on the VAT-26 form and keep a record of the vehicle mileage, called mileage allowance. Its purpose is to prove that the car is used exclusively for business purposes.

In order to keep a record of the vehicle's mileage, it is worth using ready-made formulas with an overview or an online mileage calculation program. Regardless of whether the records will be kept manually or electronically, it should contain:

  • Vehicle registration number,
  • day of beginning and ending keeping records,
  • vehicle odometer reading on the day when the records begin, as well as at the end of each accounting period and on the day the records are completed,
  • entry of the person driving the vehicle certified by the taxpayer's signature, if he is not the driver. The entry should include:
    • next entry number,
    • date and purpose of departure,
    • route definition (starting and destination),
    • the number of kilometers traveled,
    • name and surname and signature of the driver,
  • the number of kilometers traveled at the end of each accounting period and on the day the records are completed.

If the taxpayer uses the vehicle also outside the business, he may benefit from a partial deduction of VAT. The car, used for mixed purposes, gives the possibility to deduct 50% VAT.

Simplified accounting - PIT vehicle mileage records

The kilometer run for the purposes of personal income tax (PIT) is primarily used to determine the costs of using a private passenger car in business. According to the assumptions of the PIT Act, a correctly kept mileage record should contain at least:

  • Driver data,

  • Vehicle registration number,

  • consecutive number of the next entry,

  • date and purpose of departure,

  • description of the route (where from - where to),

  • the number of kilometers traveled,

  • the rate per kilometer,

  • the amount calculated on the basis of the rate per kilometer,

  • signature and details of the taxpayer.

The mileage limit determines the amount of the deduction of operating costs. This means that the expenses may be included in tax deductible costs only up to the amount resulting from the multiplication of the number of kilometers by the amount of the rate. The mileage rates are:

  • PLN 0.5214 for a passenger car with an engine capacity of up to 900 cm³,

  • PLN 0.8358 for a passenger car with an engine capacity above 900 cm³,

  • PLN 0.2302 for a motorcycle,

  • PLN 0.1382 for a moped.

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The operating costs that can be settled according to the mileage mark include:

  • fuel purchase,

  • parking fees,

  • tolls for toll roads, e.g. motorways,

  • insurance premiums (OC, AC),

  • repairs,

  • purchase of spare parts,

  • inspections and maintenance services.

Vehicle mileage records for the purposes of income tax settlement gives the possibility of deducting costs incurred in connection with the operation of the car, it does not matter whether the car is used only for business purposes or for mixed purposes, you only need to remember about the mileage limit.