Taxation of the activity of a tour leader - what is worth knowing?

Service-Tax

Tourism is one of the fastest growing industries. No wonder that nowadays more and more people are wondering about the issue of starting their own business in this area. What is the taxation of the activity of a tour leader under the VAT and PIT Act? Read the article!

Income tax and taxation of the activity of a tour leader

As in the case of any type of sole proprietorship, taxation of the activity of a tour leader can be made according to the general rules according to the tax scale. In this case, the income obtained from the activity is taxed according to the tax scale specified in art. 27 sec. 1 of the PIT Act, where two tax rates are provided - 18% and 32%.
Taxable income under general rules is combined and summed up with other sources of income, and the tax due is paid on the total income. Settlements are made on the PIT-36 form, submitted from February 15 to April 30 of the year following the tax year. Declarations submitted before the beginning of the period are considered to be submitted on February 15 of the year following the tax year.

Example 1.

The taxpayer works full-time as a mountain rescuer. Additionally, he decided to set up a sole proprietorship and provide services as a tourist guide. Due to the fact that he chose to tax his activity according to general rules, the income obtained from the employment relationship is summed up with the income from economic activity and taxed at the rate of 18%, and if the tax base exceeds PLN 85,528, the excess will be taxed at the rate of 32%.

There are no contraindications for a taxpayer to choose a flat tax for the provision of tour guide services. It is worth noting that new rules apply in this respect from the beginning of 2019.
In the previous legal state, in order to benefit from a flat tax, a declaration on the choice of this form had to be submitted by January 20 of a given tax year. However, according to the currently binding Art. 9a paragraph. 2 of the PIT Act, taxpayers are obliged to submit a written declaration to the competent head of the tax office on the choice of this method of taxation by the 20th day of the month following the month in which the first income on this account was achieved in the tax year, or by the end of the tax year, if the first such income was achieved in December of this fiscal year. It is therefore a change in favor of the taxpayer, as it is currently possible to choose a flat tax at any time in the tax year.

Example 2.

A taxpayer operating in the field of tour piloting decided to change the form of taxation and settle accounts on the basis of a flat tax. He made this decision in March. This means that if he submits a declaration in this regard to the competent tax office by April 20, he will be able to apply taxation in the form of a flat tax.

The flat tax is characterized by a fixed tax rate which, regardless of the amount of income, is always 19%. It should be noted, however, that earning income from business activity taxed with a flat tax excludes in this respect the possibility of joint settlement with the spouse and taking advantage of tax reliefs. Flat tax settlements are made on the PIT-36L form, which is also submitted from February 15 to April 30 of the year following the tax year. Declarations submitted before the beginning of the period are considered to be submitted on February 15 of the year following the tax year. Taxation of the activity of a tour leader may be carried out on both general principles and in the form of a flat tax.

Taxation of the activity of a tour leader on the basis of a flat rate tax

A person considering the form of taxation in the field of tour guide services may also opt for a lump sum on recorded revenues.

Also in this case, it is necessary to submit a declaration. As we can read in Art. 9 sec. 1 of the flat-rate tax act, a written declaration on the choice of taxation of revenues from non-agricultural economic activity in the form of a lump sum on revenues recorded for a given tax year, the taxpayer submits to the head of the tax office competent according to the place of residence of the taxpayer, and in the case of an inherited enterprise - according to the last place of residence of the deceased entrepreneur , by the 20th day of the month following the month in which the first such income was obtained in the tax year, or by the end of the tax year, if the first such income was obtained in December of the tax year.

Lump sum on registered revenues is characterized by lower tax rates. According to Art. 12 sec. 1 point 2 (l) of the Act, in the case of the provision of services by tour leaders and tourist guides (PKWiU 79.90.20.0), the flat rate is 17%.

Although a lower tax rate applies, the taxpayer must remember that in the case of a lump sum, it is not possible to include any tax deductible costs in the tax settlement. As a result, the lump sum is payable on the amount of income obtained. In addition, the lump sum cannot be settled jointly with the spouse or tax reliefs (e.g. child deduction).

Pursuant to Art. 21 sec. 2 above of the Act, taxpayers are required to submit a PIT-28 tax return to the tax office on the amount of income obtained and the lump sum due on recorded income - from February 15 to the end of February of the year following the tax year; a tax return submitted before the deadline is deemed to have been filed on February 15 of the year following the tax year.

Example 3.

The taxpayer works under a contract with a travel agency. In addition, he runs a business in the field of tour guide taxed with a lump sum. In this case, after the end of the tax year, he will be required to submit two tax returns: PIT-28 for business activity (by the end of February) and PIT-37 for income from the mandate contract (by April 30).
Incidentally, it is worth pointing out that the tax card does not apply to the services of tour leaders and tourist guides. A taxpayer may choose to tax the activities of a tour leader with a flat rate on recorded revenues. However, he cannot use a tax deduction card for this type of activity.

Taxation of tour leader activity and value added tax

Let us now turn to the issue of VAT. The activity of a tour operator is the provision of a service, which means that the place where the service is to be provided must first be determined.
The tax consequences depend on whether the service is provided to another entity conducting business activity or to consumers. As it follows from Art. 28b paragraph. 1 of the VAT Act, the place of providing services to the taxpayer is the place where the taxpayer who is the service recipient has his registered office. And in the light of Art. 28c paragraph. 1 of the VAT Act, the place of providing services to non-taxable entities is the place where the service provider has his registered office. We will discuss possible cases on the basis of the following examples:

Example 4.

The tour leader provides services to clients from Poland, Slovakia and the Czech Republic. In such a case, Art. 28c paragraph. 1 of the Act, which means that this service is taxed in the country where the service provider is established, i.e. in Poland. Such a service is a paid service subject to Polish 23% VAT.

Example 5.

The tour leader provides a service to an entrepreneur from Poland. In such a case, Art. 28b paragraph. 1 of the Act, which means that this service is taxed in the country of the service recipient's seat, i.e. in Poland. Such a service is a paid service subject to Polish 23% VAT.

Example 6.

The tour leader provides a service to an entrepreneur from Germany. In this case, Art. 28b paragraph. 1 of the act, which means that this service is taxed in the country where the recipient is established, i.e. in Germany. Such a benefit is not taxable in Poland but in Germany, and the tax settlement obligation is transferred to the buyer. The Polish taxpayer issues an invoice without the tax amount, with the NP rate (Not subject to) and with the annotation "reverse charge".

Naturally, a taxpayer may choose a subjective tax exemption in terms of VAT. Pursuant to Art. 113 paragraph. 1 and sec. 9 of the Act, sales made by a taxpayer are exempt from tax if the sales value in the previous year did not exceed PLN 200,000. If the taxpayer starts operating during the year, the limit is calculated proportionally to the period remaining until the end of the calendar year. The activity of a tour leader is a service that is, in principle, subject to VAT. The taxpayer may, however, take advantage of the exemption described in art. 113 of the VAT Act.