Types of corporate income taxation in Poland
Due to the type of business, Polish law distinguishes between many ways of taxing corporate income. It happens that the applicable regulations impose a given form of accounting on the entrepreneur, but most often it happens that the taxpayer himself decides how he wants to settle accounts with the tax office. Finding the optimal solution is the key to success.
Establishing a business activity is always associated with making binding choices as to the organizational and legal structure under which the business will be conducted. The choice of future entrepreneurs is individual business, also commonly known as sole proprietorship, a partnership (civil law, limited partnership, general partnership, partnership) and a joint-stock company (joint-stock and limited liability company). The later form of taxation of the enterprise depends on this decision.
The basic tax burden for entities conducting business activity is the personal income tax (PIT), the personal corporate tax (CIT) and the value added tax, i.e. VAT. Of course, these are not the only taxes imposed on entrepreneurs, but it is these three taxes that play the greatest role in economic activity. In turn, the form of taxation with the above-mentioned taxes strictly depends on the type, object and size of the business, the amount of income generated by the company and, to some extent, on the individual decision of the taxpayer.
Income tax from individuals
As a rule, personal income tax (PIT) applies to income from individual business activities and partnerships. What's more, the legislator does not differentiate the source of these revenues, in accordance with the Act on personal income tax, economic activity also includes such gainful production, construction, trade, service activities, or such activity consisting in searching, identifying and extracting minerals. from deposits and on the use of intangible or legal things and assets, which is carried out on behalf of the taxpayer on a continuous basis. This means that all income is taxable (ie income less tax deductible costs), regardless of how it was obtained. The entrepreneur decides how he taxes his income. You can choose between progressive taxation (the so-called main principle of taxation, consisting in taxation at progressive rates, increasing depending on the amount of income earned in a given tax year) and linear taxation (at a flat tax rate, currently 19% of the tax base).
The choice of a flat tax can be made by January 20 of a given tax year by submitting a relevant written declaration to the competent head of the tax office. If the entrepreneur started running a business during the tax year, he should submit a relevant declaration prior to the commencement of this activity, but not later than on the date of obtaining the first income. Keeping the above-mentioned deadline is very important for the taxpayer, as overlooking it will make it necessary to be subject to the general rules of taxation at progressive rates. The choice of the method of taxation made in the above-mentioned declaration also applies to the following years, unless the taxpayer, by January 20 of the tax year, notifies in writing the competent head of the tax office about the resignation from this method of taxation or submits a declaration or a written request for the application of tax forms within that period. taxation specified in the Lump-sum Income Tax Act.
Moreover, in the personal income tax, there is an obligation to make advance payments for this tax to the tax office. This should be done by the 20th day of each month following the period to which the advance relates. The final tax settlement takes place on the date of submitting the annual tax return, the so-called PIT 36.
Lump sum tax on certain income earned by natural persons
Some taxpayers running a business may conduct tax settlements with the tax office on the basis of the so-called tax card. The condition for taxpayers to be taxed in the form is, first of all, the submission of an appropriate application to the competent tax office. This must be done no later than January 20 of the calendar year in question. It is also necessary to indicate in the application the intention to run a business included in one of the categories indicated in the Table of Monthly Income Tax Rates, constituting "Annex to the Act on flat-rate income tax on certain income earned by natural persons". Importantly, taxpayers may be taxed in the form of a tax card also when they conduct business activities in the form of a civil partnership, provided that the total number of partners and employees does not exceed the employment level specified in the Table of Monthly Income Tax Rates.
As a rule of taxation, the head of the tax office issues a decision setting the amount of income tax separately for each tax year. If the activity is conducted in the form of a partnership, all partners are listed in this decision. If, on the other hand, the head of the tax office does not find grounds for using a tax card, then the taxpayer is obliged to pay a lump sum on recorded income, if it meets its conditions, or income tax on general principles, i.e. on the basis of the Personal Income Tax Act.
Income tax from legal persons applies to the income of entrepreneurs operating in the form of limited liability companies as well as income obtained from running a business by cooperatives, foundations and associations. On the other hand, the income related to the economic activity of a given entity is the income resulting from its business activities, less the costs of obtaining them. If the tax deductible costs exceed the sum of revenues, there is a loss which reduces the income obtained in the following tax years. Moreover, taxpayers of corporate income tax are also required to pay advances on income tax in the amount of the difference between the tax due on the income earned from the beginning of the tax year and the sum of advances due for the previous months. This must be done by the 20th of each month for the previous month. The final tax settlement takes place on the date of submitting the annual tax return, which must be completed by the end of the third month of the following tax year.
A characteristic feature of the structure of corporate income tax is a certain departure from the calendar setting of the length of the tax year. The taxpayer may differently determine the period of twelve calendar months which will constitute the tax year for a given entity. The condition is an appropriate entry in the statute, articles of association or other document regulating the system of a given taxpayer and notification of the competent head of the tax office.
Tax on goods and services
Taxpayers of value added tax are all entities that independently conduct business activity, regardless of the purpose or result of this activity. Importantly, the VAT Act uses a very broad concept of economic activity, which covers all activities of producers, traders or service providers, including entities obtaining natural resources, farmers and the activities of freelancers. In addition, the act requires that a business activity subject to VAT is also considered to be a one-off activity, if the circumstances indicate the intention to perform it repeatedly, and such activities that consist in the use of goods or intangible assets on a continuous basis for commercial purposes.
The taxable amount for VAT is turnover, which means all amounts due for the paid supply of goods and for the provision of services against payment within the territory of the country, for the export of goods and for the intra-Community supply of goods, less the amount of the tax due. On the other hand, the taxable amount in the import of goods is the customs value increased by the duty payable. However, it is worth remembering that if the import includes goods subject to excise duty, then the tax base will be the customs value increased by the duty and excise duty due. The amount due covers the entire benefit due from the buyer. 23% VAT must be deducted from the correctly established base. The principal provides, however, a number of discounts for individual industries, for which preferential tax rates of 8 and 5 percent are applied.
One of the basic obligations of VAT taxpayers is the documentation of taxable activities with the use of bills in the form of the so-called VAT invoices. The exception are activities performed in relation to natural persons who do not conduct business activity, i.e. in consumer trade. In this case, the obligation to issue an invoice does not occur, however, at the request of these persons, taxpayers are obliged to issue an invoice within seven days from the date of service or delivery of goods. The tax obligation, in turn, arises upon the release of the goods or the performance of the service, or upon the issue of the invoice, but no later than on the seventh day from the date of delivery of the goods or performance of the service. Taxpayers are required to submit VAT returns to the tax office for monthly periods by the 25th day of the month following each subsequent month. The declaration must indicate the amount of the tax due or the tax to be refunded.At the same time, without waiting for a call from the head of the tax office, the amount of tax for the previous month must be paid.
One of the principles of the construction of VAT is the principle of deductibility, which is an expression of the fact that VAT should, as a rule, be neutral towards its taxpayers. Therefore, the taxpayer is entitled to deduct VAT to the extent that the goods and services are used to perform taxable activities. Hence, there is no right to deduct VAT on purchases not related to the business and partial deductions related to exempt and taxable sales. In practice, the deduction is the right of the taxpayer to reduce the amount of tax due on the sale by this VAT, which results in either the reduction of the VAT payable or the creation of a surplus. Additionally, if the value of taxable sales of goods or services does not exceed the amount of PLN 150,000 during the tax year. PLN, it is possible to exempt from VAT.
Taxes which, in the opinion of taxpayers, constitute the greatest burden for them, i.e. income taxes and VAT, are collected through the so-called self-dimension. This means that people running a business have to correctly calculate the tax themselves, and then pay it to the bank account of the competent tax office. Failure to properly fulfill this obligation may result in criminal liability.