Full accounting - when is an entrepreneur obliged to switch to it?

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Every entrepreneur is obliged to keep records of his company's economic operations. However, how they will be registered depends largely on the legal form of the business and the annual income generated. Taxpayers can conduct business using simplified accounting (KPiR, lump sum) or full accounting. However, there are situations where the entrepreneur is obliged to switch from simplified to full accounting. Check when full accounting becomes mandatory for an entrepreneur.

Who can use simplified accounting?

Simplified accounting is intended for natural persons, civil law partnerships of natural persons, general partnerships of natural persons and partnerships whose income from the previous year did not exceed the equivalent of EUR 2,000,000 in the Polish currency. Small accounting differs from full accounting in that it requires much less detailed records. The entrepreneur only has to - as a rule - run:

  • fixed assets register,
  • vehicle mileage records,
  • VAT register of sales and purchases - in the case of active VAT payers,
  • book of revenues and expenses - in the case of taxation with a tax scale or flat tax,
  • revenue record - in the case of lump-sum taxation on recorded revenue.

Currently, an entrepreneur who conducts simplified accounting can use one of the three forms of taxation:

  1. book of revenues and expenses - the entrepreneur can choose between two forms of taxation: general rules - 17% or 32% (if the amount of PLN 85,528 is exceeded) or a flat tax - 19%. Tax is payable on the earned income. Income is understood here as income less costs. Moreover, if the tax does not come out for payment, the entrepreneur is not obliged to report it anywhere.
  2. lump sum on registered revenues - consists in paying a specific tax rate, which depends on the type of business activity. Tax is calculated only on income. This is because when choosing this form of taxation, the entrepreneur cannot reduce the amount of the advance by the costs related to the activity, but only by the health insurance (7.75%) and social contribution. Additionally, it should be remembered that in order to be able to use this form of taxation, the taxpayer may not exceed the turnover limit of EUR 2,000,000 for the previous year.
  3. tax card - this form of taxation may be used by a small group of entrepreneurs. It consists in paying the tax to the tax office in a certain amount. The amount is determined in advance by the head of the competent tax office to which the taxpayer is subject. The tax amount is calculated based on several factors. They include, among others: the scope of the business activity, the number of employees and the number of inhabitants in the town where the given business activity is conducted.

Entrepreneurs who want to use the tax card must run a business listed in art. 23 sec. 1. of the act on flat-rate income tax on certain revenues earned by natural persons.

Full accounting - when should you give up simplified accounting?

Entrepreneurs who have so far kept simplified bookkeeping and have decided to transform their activities into a commercial law capital company (joint-stock and limited liability companies) or a commercial partnership (limited joint-stock partnerships and limited joint-stock partnerships) will have to switch to full books, for these types of activity there is an obligation to keep accounting books. Start a free 30-day trial period with no strings attached!

In addition, entrepreneurs whose net revenues from the sale of goods, products and financial operations exceed the equivalent of EUR 2 million converted into PLN at the average exchange rate announced by the National Bank of Poland on the first business day of October of the year preceding the year for which full accounting will become applicable. . The limit of revenues in 2020 is PLN 8,746,800, i.e. EUR 2,000,000 × PLN 4.3734 / EUR (average NBP exchange rate of October 1, 2019 - table No. 190 / A / NBP / 2019). The revenue limit in 2021 is PLN 9,030,600, i.e. EUR 2,000,000 × PLN 4.5153 / EUR (average NBP exchange rate of October 1, 2020 - table No. 192 / A / NBP / 2020). To sum up, an entrepreneur who conducted simplified accounting, but exceeded the above-mentioned limit in the previous year, or runs or will run the above-mentioned company, is obliged to keep accounting based on full books. This results in increased obligations in relation to the recording of business operations of the company. The entrepreneur will be obliged to record all economic operations, i.e. to keep the so-called accounting books, which include:

  • logs,
  • ledger,
  • auxiliary books,
  • statements of turnover and balances of general ledger accounts and balances of subsidiary ledger accounts,
  • list of assets and liabilities (inventory).

In addition, the entrepreneur will also be required to prepare financial statements, which include: balance sheet, profit and loss account, introductory information to the report, as well as additional information and explanations.