Inventory during the year and advance income tax payment

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Taxpayers who keep a tax book of revenues and expenses, have the option of calculating advances for income tax, taking into account the so-called inventory differences.For this purpose, at the end of a given month, the taxpayer prepares an inventory of goods, raw materials and materials, which is taken into account when generating the income tax advance. How does the inventory during the year affect the amount of the advance payment? Check the answer in this article.

When is the inventory drawn up?

According to Art. 24 of the regulation on keeping a tax book of revenues and expenses, taxpayers are required to prepare and enter in the book a physical inventory:

  • on January 1,

  • at the end of each tax year,

  • on the day of commencement of operations during the tax year,

  • in the event of loss of the right to flat-rate income tax taxation during the tax year,

  • in the event of a change of shareholder,

  • in the event of a change in the proportion of shareholders' shares,

  • in the event of liquidation of activities.

In addition, taxpayers also have the right to carry out an inventory during the tax year, e.g. for each month separately. This is called "Mid-year" physical inventory. In such a situation, its value is taken into account when generating the advance tax for the period in which the taxpayer decided to summarize the inventory.

Inventory during the year - how does it affect the amount of the advance payment for income tax?

The basis for determining the advance for income tax in the case of taxpayers settling on general principles or with a flat tax are the entrepreneur's revenues, less the costs incurred by him.

Pursuant to Art. 24 sec. 2 of the PIT Act, the income is increased or decreased by the difference resulting from the comparison of the final and initial inventory. If the difference between the final and initial inventory is positive, then the income is increased by this difference, and if the difference is negative - the income is decreased. When drawing up the physical inventory during the year, the following are used to calculate the inventory difference for each month:
• initial inventory for January 1 of a given year,
• final physical inventory made on the last day of the month for which the advance income tax is calculated (inventory during the year).

Example 1.

The taxpayer running the KPiR has decided that at the end of April and May 2020 it will draw up an interim physical inventory, which will be taken into account when calculating the advance on income tax for these months.

As at January 1, 2020, the physical inventory value was PLN 58,000. In turn, the inventory at the end of April 2020 was PLN 32,000, and at the end of May 2020 - PLN 20,900.

On the other hand, revenues and costs (calculated cumulatively from the beginning of the year) for these months were:

  • April:

    • revenues: PLN 140,000
    • costs: PLN 63,000
    • Inventory difference decreasing: PLN 26,000 (PLN 58,000 - PLN 32,000)
  • May:

    • revenues: PLN 189,000
    • costs: PLN 72,000
    • Inventory difference decreasing: PLN 37,100 (PLN 58,000 - PLN 20,900)

According to the above information, the income constituting the basis for calculating income tax advances is calculated as follows:

  • April:

income to calculate the advance payment = revenues - costs - inventory difference reducing, i.e .:

PLN 140,000 - PLN 63,000 - PLN 26,000 = PLN 51,000.

  • May:

income to calculate the advance payment = revenues - costs - inventory difference decreasing, i.e .:

PLN 189,000 - PLN 72,000 - PLN 37,100 = PLN 79,900.

Inventory during the year and the need to notify the tax office of the intention to prepare

From September 2018, the obligation to inform the tax office about the intention to prepare a physical inventory has been abolished.

Until now, the provisions stipulated that if a taxpayer intends to prepare a physical inventory on a date other than January 1, December 31 and the day of commencement of business activity, he must notify the competent head of the tax office of this fact in writing at least 7 days before the date on which that inventory was compiled.

Currently, the taxpayer who draws up an inventory during the year does not have to inform the tax office about this fact.

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Example 2.

Mr. Marek decided to prepare an inventory during the year. It is going to conduct a physical inventory at the end of April 2020. Does this fact have to be reported to the Tax Office?

No, due to the fact that currently the obligation to notify the tax office of the intention to prepare a physical inventory does not apply, Mr. Marek does not have to inform the tax office about this fact.

Interim inventory in the wFirma.pl system

The wFirma.pl system allows you to take into account the inventory drawn up during the year when calculating income tax advances.

The inventory should be drawn up outside the system, and then its value should be entered via the tab: RECORDS »REMANENTS» ADD REMANENT. In the window that will appear, select the type of inventory - if it is an inventory at the end of a given period, select the final inventory and fill in its preparation date and value.

After adding the ending inventory of a given month, an initial inventory of the next month will be created automatically, with the date on the next day and with the same value as the previously entered ending inventory.

The value of the introduced interim inventory will be taken into account when calculating the income tax advance payment for the period to which the inventory relates.

In order to calculate the advance payment for the income tax for a given period, go to the tab: START »TAXES» INCOME TAX »CALCULATE THE TAX by selecting the period for which the advance payment is to be generated.

In order to take the inventory difference into account when generating an advance payment for income tax, in the window for adding an advance payment for income tax, it is necessary to select the APPLY REMANENT DIFFERENCE option.

The details of calculating the advance for the income tax will include the inventory difference, which will affect the amount of the advance.