Flat tax - advantages and disadvantages


The entrepreneur can decide for himself how his activities will be taxed. He can choose from: taxation according to general rules, registered lump sum, tax card and flat tax. The last of these types will be the topic of this article.

Linear tax - definition

A flat tax is a method of tax settlement which assumes that the amount of the levy due is proportional to the size of the tax base. It is used to calculate the corporate income tax base and the personal income tax base. Its characteristic feature is the fixed tax rate, which is currently 19%.

Flat tax - benefits

Certainly, the biggest advantage of this form of taxation is the fixed rate, which does not change even when the company generates high income. Another factor that influences the attractiveness of the flat tax is the ease of its calculation. There is no obligation to remember about the thresholds in the tax scale or to take into account tax-free amounts. The last benefit is that you do not have to pay tax when the entrepreneur has not earned any income.

Flat tax - cons

The seemingly attractive form of taxation also has several drawbacks. First of all, deciding on it, the entrepreneur loses the possibility of using tax reliefs, e.g. for the Internet, children, and rehabilitation relief. He can no longer settle accounts with his spouse or a single-raised child or deduct the tax-free amount. Instead, he has to keep a book of revenues and expenditures or accounting books (if the income exceeds EUR 1,200,000).

The aforementioned disadvantages show that this form of taxation - contrary to popular opinion - will not always be the most profitable option. Therefore, before making a decision on choosing a flat tax, it is worth checking what amounts would be paid using its rules and which in the case of others (e.g. income taxation on general principles).