Tax changes in 2021 - everything you need to know

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For several years, the legislator has been introducing new tax changes at the beginning of the next year. Some of them apply only to certain groups of entrepreneurs, others are a privilege or obligation for all taxpayers. Let's check what tax changes will bring in 2021!

A set of changes in the lump sum on recorded revenues

Taxpayers who have opted for lump-sum taxation of their revenues should read the numerous changes introduced in detail, as their scope is multifaceted. The modifications are introduced by the Act of November 28, 2020 amending the Personal Income Tax Act, the Corporate Income Tax Act, the Lump-sum Income Tax Act on certain revenues earned by natural persons and some other acts.

New lump sum limit

One of the most spectacular changes in 2021 is the increase in the income limit, which entitles you to take advantage of lump-sum taxation. In 2020, this limit was EUR 250,000. Since 2021, the limit amount has increased 8 times and amounts to EUR 2,000,000. In practice, this means that by achieving revenues in the amount of e.g. EUR 1,000,000 in 2020, entrepreneurs do not lose the right to tax with a lump sum - as it has been the case so far. The limit entitling to taxation of income in 2021 with a lump sum is PLN 9,030,600. Additionally, the possibility of settling the tax in a flat-rate form will be available to a wider group of entrepreneurs. It is related to the increase of the limit entitling to quarterly settlements. In 2020, this limit was EUR 250,000, while in 2021 - EUR 2,000,000.

A wider catalog of entities entitled to lump sum taxation

According to the new wording of Art. 4 sec. 1 point 11 of the Lump-sum Income Tax Act on certain revenues earned by natural persons to a group of entrepreneurs conducting activities performed in person in the form of freelance professions include:

  • doctors, dentists, veterinarians, dental technicians, medical assistants, midwives, nurses, psychologists, physiotherapists;
  • translators, lawyers, notaries, legal advisers;
  • architects, construction engineers, construction experts;
  • statutory auditors, accountants, tax advisers;
  • insurance agents, agents offering supplementary insurance, reinsurance brokers, insurance brokers;
  • restructuring advisors, securities brokers, investment advisers, agents of investment companies, patent attorneys;
  • teachers in the provision of educational services by giving lessons by the hour.

On the other hand, personal pursuit of a liberal profession is considered to be pursuing an activity without employing employees. This means that when performing a freelance profession, it is not possible to employ people who perform activities as part of the services provided by the taxpayer, regardless of the legal form, i.e. on the basis of employment contracts, mandate contracts, contracts for specific work and other contracts of a similar nature. From 2021, lump-sum taxation may apply to a wider range of freelance entrepreneurs, e.g. accountants, tax advisers, architects.

Flat rate reduction

From 2021, the 20% flat rate for taxing the income of taxpayers engaged in liberal professions has been abolished. It was reduced to 17%.

In addition, the legislator introduced a new 15% flat rate, which covers sales taxed so far at a rate of 17%, i.e. provision of services:

  • brokerage in the sale of motorcycles and their parts and accessories; legal (PKWiU 45.40.40.0);
  • accounting and tax advisory services (PKWiU division 69), other than those provided within the framework of freelance professions;
  • advertising; market and public opinion research services (PKWiU division 73);
  • photographic (PKWiU 74.2);
  • cultural and entertainment (PKWiU division 90);
  • related to sport, entertainment and recreation (PKWiU division 93).

Another new flat rate of 10% relates to revenues from the provision of services in the field of purchase and sale of real estate for own account (PKWiU 68.10.1). A flat rate of 8.5% up to the amount of revenues amounting to PLN 100,000 and a rate of 12.5% ​​on the excess of revenues over PLN 100,000 may be applied by taxpayers providing services in the field of scientific research and development works (PKWiU section 72).

A package of changes on the basis of VAT under the so-called Slim VAT

In 2021, entrepreneurs should also learn about the changes introduced by the so-called Slim VAT, i.e. a package of simplification of VAT settlements by taxpayers.

Tax changes in the field of correction invoices

When running a business, it happens that entrepreneurs have to issue corrections to sales documents. Some of them result from an obvious mistake or accounting errors, and some are the result of new events, e.g. the return of the goods by the buyer. Until the end of 2020, in order to be able to include a reduction adjustment ("in minus") in the records, entrepreneurs had to obtain a confirmation of receipt of a correcting invoice from the buyer. From 2021, it is enough for the seller to have documented arrangements made between him and the buyer, on the basis of which a corrective invoice has been issued. As a result, corrective invoices lowering the tax base ("in minus" corrections) are posted on the date of obtaining documentation confirming the conditions for issuing the correction. In addition, the introduced changes in the settlement of correcting invoices did not change the method of recognizing corrections related to transactions in the records:

  • export of goods and intra-community supply of goods;
  • supplies of goods and services for which the place of taxation is outside the territory of the country.

This means that in order to post a correcting invoice reducing the tax base of the above-mentioned transactions, the taxpayer still does not need to have documentation confirming the arrangements with the buyer. Confirmation of the arrangements made as the basis for issuing a negative correction may also be the acceptance of the correcting invoice sent to the buyer.

An important change is also the repeal of Art. 29a paragraph. 15 point 4, according to which the seller could include in the records reducing the tax base a corrective invoice that has not been confirmed by the buyer, provided that there is a documented attempt to deliver the corrective invoice to the buyer (the documentation had to show that the buyer received a correcting invoice), e.g. by shipment corrections by registered mail with acknowledgment of receipt. From 2021, this method cannot be used by entrepreneurs, because it is no longer tantamount to having documentation confirming the arrangements made between the seller and the buyer.

Moreover, the issue of the posting period of increasing (in plus) correcting invoices was also regulated. From 2021, correction invoices increasing the price must be entered in the sales VAT register in the settlement for the period in which the cause of the increase in the tax base occurred. A detailed discussion of changes related to correction invoices from 2021 in the article: Correcting invoice - posting on an example.

Extension of the VAT deduction period

According to the new wording of Art. 86 sec. 11 of the VAT Act, the entrepreneur has the right to deduct VAT from the invoice not in one of the two subsequent accounting periods, but in one of the three subsequent accounting periods. In practice, this means that the taxpayer has four months to deduct VAT, because he acquired this right in the month of receiving the invoice.

Example 1.

Mr. Łukasz runs the company XYZ and settles VAT on a monthly basis. In December 2020, he found an unposted invoice that he received in October. Does Mr. Łukasz have the right to deduct VAT without the need to correct the JPK_V7 file?

Yes, Mr. Łukasz acquired the right to deduct VAT in the month of receipt of the invoice, i.e. in October. This means that he has the right to deduct VAT in October or in one of the two subsequent settlement periods, i.e. in November or December.

If Mr. Łukasz received the invoice in January 2021, he could deduct VAT in January or in one of the three settlement periods, i.e. in February, March or April. The extension of the deadline for the deduction of VAT does not apply to taxpayers who settle quarterly. According to the new wording of Art. 86 sec. 11 of the VAT Act in the case of taxpayers referred to in art. 99 sec. 2 and 3 (quarterly VAT taxpayers), the date of VAT deduction is maximum one of the next two settlement periods.

Increase of the tax exemption limit for low-value gifts

From 2021, the tax exemption limit for low-value gifts was increased by 100%, i.e. from PLN 10 to PLN 20. In the justification to the bill on the Slim VAT package, we can read that this action is associated with a noticeable increase in the prices of promotional items. On the other hand, the increase in the limit of low-value gifts is intended to enable better promotion of Polish goods and services both at home and abroad.

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The right to deduct VAT on accommodation services

Until the end of 2020, the position of the tax authorities was unchanged: in the case of purchasing accommodation services, the taxpayer was not entitled to deduct VAT from such an invoice. The Slim VAT package introduces an exception in this respect. Namely, art. 88 sec. 1 point 4 of the VAT Act is extended by lit. c, according to which taxpayers may deduct VAT on the purchase of accommodation services, provided that:

  • was purchased for resale;
  • the taxpayer acquired it in his own name, but for the benefit of a third party (Article 9 (2a) of the VAT Act).

We are dealing here with the right to deduct VAT on the purchase of an accommodation service in the case of issuing the so-called re-invoicing. Making the right to deduct VAT dependent on the re-invoicing of the purchased accommodation service is aimed at preventing the deduction of VAT in the event of using the accommodation service for the provision of comprehensive services subject to general taxation.

Example 3.

As part of his business activity, Mr. Aleksander provides training services throughout Poland. Therefore, he purchases accommodation services for himself as an entrepreneur, because the places of training are several hundred kilometers away from his place of residence. As part of the simplifications introduced by the Slim VAT package, can Mr. Aleksander deduct VAT on accommodation services if he charges the client with the costs of stay?

No, due to the fact that Mr. Aleksander purchases for his own benefit, it is not possible to issue a re-invoice. It is irrelevant that, as part of the comprehensive service, it charges the customer with the costs of accommodation. Therefore, there is no right to deduct VAT from the invoice for accommodation services.

Limiting the limit of abolition relief

The abolition relief applies to taxpayers who, in addition to income taxed in Poland, obtained income abroad. It consists in the fact that a taxpayer may not pay income tax on foreign income, provided that he taxed it in the country in which he obtained the income. Thanks to the abolition allowance, taxpayers did not have to compensate for any differences between the amount of tax paid abroad and the amount of tax they would have to pay on this account in Poland. This relief was advantageous mainly in the case of obtaining revenues in countries where the income tax rate is lower than in Poland. Moreover, until the end of 2020, there was no abolition relief limit in Poland. From 2021, the abolition allowance limit was introduced, which amounts to PLN 1,360. This means that after exceeding the income equal to the tax-free amount, i.e. PLN 8,000, the abolition allowance is not granted. The reasons for introducing the abolition allowance limit were mentioned in the justification to the draft, in which we read:

“First, the awareness of taxpayers earning their income abroad has increased about the tax consequences of earning income in another country. Secondly, negative consequences were noticed related to the use of the tax relief for an aggressive tax policy, with the use of the provisions of agreements on the avoidance of double taxation. Therefore, there was a need to change the rules of the abolition relief, so that it would apply only to those taxpayers who earn the lowest income, and therefore most need state support in reducing the tax burden ".

Mandatory online cash register for selected industries

From 2020, the first industries have been obliged to use online cash registers. The legislator did not require all entrepreneurs to replace the existing cash registers with a paper or electronic copy in the same period. Taxpayers were divided into four groups. From January 2021, the obligation to use online cash registers will cover other industries, i.e. taxpayers:

  • providing regular or seasonal catering services - stationary catering establishments and short-term accommodation services;
  • dealing in the sale of coal, briquette and similar solid fuels made from coal, lignite, coke and semi-coke intended for heating purposes.

However, from July 2021, the obligation to use online cash registers will cover another group of entrepreneurs providing the following services:

  • hairdressing;
  • cosmetic and cosmetological;
  • construction;
  • in the field of medical care provided by doctors and dentists;
  • legal;
  • related to the activities of facilities to improve physical condition - only in the field of admission.

A detailed discussion of the obligations of using an online cash register can be found in the article: Online cash registers - deadline for implementation. To sum up, with the new year entrepreneurs should learn about the next obligations that they have to fulfill and the privileges they can use. The tax changes in 2021 described in the article are not all the news that will be introduced. In the legislative process, there are many other regulations and amendments to laws that may enter into force in the course of 2021. That is why it is worth following the tax changes in 2021 on a regular basis.