People running a business are required to choose the form of taxation of the company. The settlement of income tax from the conducted business activity can be done in several ways. One of them is a flat-rate tax.
What is a flat-rate tax? When does one lose the right to this form of taxation?
Entrepreneurs settling income tax they can choose a lump sum. This form of taxation assumes that it is calculated from the total income, but not reduced by the costs of obtaining it. This type of solution seems beneficial, but it should be remembered that not every entrepreneur has the right to use it. Not all taxpayers are subject to the same flat rate. It is therefore worth finding out, who can choose flat-rate tax as a form of taxation of the business activity conducted.
The most important thing is to establish, who is not subject to flat-rate tax. A chance for flat-rate tax exists when the person running the company does not intend to conduct transactions with the previous or current employer. This means that flat-rate income tax does not include people employed full-time on the basis of an employment contract or a contract of mandate, who plan to start their own business and settle accounts with their current employer in the form of invoices. It is important to remember the principle that applies in Polish accounting legislation. According to the regulations, an entrepreneur who decides to a lump sum, cannot conduct even a single transaction with a current or former employer, because he or she automatically loses the right to settle this form of taxation.
Income limits in 2021 entitling you to the lump sum?
Amended the act on flat-rate income tax from certain revenues that are earned by individuals from lump sum settlement, it also excludes persons who provide services such as running pharmacies, activities in the form of buying and selling foreign currencies, as well as conducting activities in the field of trade in parts and accessories intended for motor vehicles. Flat-rate tax as a form of settlement in 2021 it is also not suitable for taxpayers who exceeded revenues in the previous calendar year in the amount of:
- €2000000 from business conducted individually or as a civil or general partnership of individuals in the form of a monthly settlement; the amount must relate to the sum of the income of all partners;
- €2000000 from business activities conducted individually or as a civil or general partnership of individuals settling their accounts quarterly.
These are revenue limits set in euro, which should then be converted into Polish currency at the average euro exchange rate announced by the National Bank of Poland on 1 October in the year preceding the given tax year.
Also check: Tax Schemes Again
What types of business activities can be settled in the form of flat-rate income tax?
Lump sum settlement requires selecting the appropriate rate. Its amount depends on the type of business activity conducted by the person. The following values are available: 2%, 3%, 5,5%, 8,5%, 10%, 12,5%, 15% and 17%. Flat-rate income tax you can pay using one of the above-mentioned values, which are assigned to a specific activity. In the case of performing various services the amount of flat-rate income tax in the form of a percentage is determined in accordance with the type of services provided by a given entrepreneur.
Flat rate 17% is intended for taxpayers performing so-called liberal professions. These include translators, tax advisors, dental technicians, doctors, veterinarians, dentists, nurses, midwives and tutoring teachers. In turn, 3% flat rate includes income generated from catering activities, with the exception of the sale of beverages with an alcohol content exceeding 1,5%, as well as the provision of services in the field of animal production, trade, and the activities of lagoon and sea fishermen. 3% flat rate also covers the disposal against payment of movable assets or movable assets of an inherited business.
Making a decision to settle on a flat-rate basis in a given tax year requires preparing a written declaration, which should be delivered to the head of the relevant tax office by the 20th day of the month following the month in which the first income from this source was achieved in the tax year. This form of settling the company's income tax can also be established already during the submission of the CEIDG-1 registration application.
