Choosing the form of taxation for a taxpayer starting business activity

Service-Tax

Currently, in order to register a business, an application is filed for entry in the Central Register and Information on Economic Activity (CEIDG). For this purpose, complete the CEIDG -1 form. What choice of the form of taxation do entrepreneurs who start their business have? We advise!

Submission of the CEIDG-1 application to register your business

A great facilitation for future entrepreneurs is the method of submitting a completed CEIDG-1 application - you can do it:

  • via an electronic form (available on the CEIDG website),
  • via an electronic platform for public administration services,
  • in the Public Information Bulletin of the Minister of Economy,
  • at a selected commune office (in person or in the form of a registered letter).

The application for entry in CEIDG replaces the following documents (so far submitted to competent offices):

  • application for a REGON number,
  • identification application to the Tax Office (assignment of NIP number),
  • declaration on the choice of the form of taxation,
  • notification of the contribution payer to the Social Insurance Institution or a declaration on the continuation of social insurance due to farmers.

The choice of the form of taxation

When making a decision related to starting a business, it is worth considering carefully the choice of the form of taxation.

Future entrepreneurs have a choice here:

  1. General rules,
  2. flat tax,
  3. a lump sum.

1. General principles

This form of taxation is one of the most popular and is granted ex officio. With this form of taxation, the degree of tax burden depends on the level of the taxpayer's income. The regulations here provide for two rates of 17 and 32%.

2. Flat tax

The flat tax is 19% of the tax calculation basis and is settled on the PIT-36L form.

Taxpayer who:

  • wants to be taxed with a flat tax throughout the year - submits the CEIDG-1 update by the 20th day of the month following the month in which the taxpayer achieved the first income in the tax year, or by the end of the tax year, if the first such income was achieved in December of the tax year ;
  • starts running a business during the tax year and wants to benefit from flat taxation - this is reported on the CEIDG-1 application when setting up a business.

Example 1.

In 2021, the taxpayer intends to use a linear form of taxation. If the first income is in:

a. January - a declaration on the choice of a flat tax is submitted by February 20,

b. March - a declaration on the choice of a flat tax is submitted by April 22,

c. April - a declaration on the choice of a flat tax is submitted by 20 May.

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3. Lump-sum tax

Natural persons can pay lump-sum income tax in two forms:

  • lump sum on recorded revenues,
  • tax card.

The selection is made by submitting the CEIDG-1 application to the head of the Tax Office with jurisdiction over the place of residence, including the choice of a lump sum as a form of taxation.

In order to take advantage of this form of taxation, it is necessary to conduct an activity specified in the Act on flat-rate income tax, and the value of taxation will depend on the type of activity.

Taxpayer who:

  • wants to be taxed with a lump sum throughout the year - submits the CEIDG-1 update by the 20th day of the month following the month in which the taxpayer earned the first income in the tax year, or by the end of the tax year, if the first such income was achieved in December of the tax year;
  • starts running a business during the tax year and wants to benefit from lump-sum taxation - this is reported on the CEIDG-1 application when setting up a business.

Taxpayers who have submitted a notification on a given form of taxation and want to use this form in the following years - do not have to submit repeated applications because CEIDG-1 remains legally valid.

If you choose a tax card, you need to submit an application on the PIT-16 form or attach it to the CEIDG-1 application.