HOW TO CALCULATE THE ADVANCE TAX PAYMENT

As an entrepreneur, you are obliged to calculate and pay advances on income tax during the year.  How and when to do this?

Time limits

An entrepreneur can opt for the monthly or quarterly settlement with the office.  Monthly advance on income tax is to be paid by the 20th day of the month following the month to which the advance relates to.  The quarterly advance, by the 20th day of the month after the end of the quarter for which the commitment is settled.

The obligation to pay the last advance tax (for December or the last quarter) do not apply to those who before expiry of the period prescribed for its payment (that is by 20th January of the next tax year) submit annual return and pay the resulting tax.

The tax rate

Advance payment obligation arises in the month/quarter when revenue generated from the beginning of the year exceeded the amount of PLN 3091 (This is the quotient of the amount decreasing the tax referred to in Article 27(1) of  Personal Income Tax Act and the lowest tax rate referred to in Article 27(1).  In 2017, the amount is PLN 3.089, and after rounding the amount which does not cause the obligation to pay tax amounts to PLN 3 091)

Calculation scheme in connection with the taxation of the advance income tax according to the tax rate is as follows:

1. First, from the amount of revenue (from the beginning of the year) deduct costs incurred during that period.  In this way, you will receive the difference between the revenues and costs, that is to say, the amount of income.

2. Next, from that sum deduct loss from previous years (read more about the settlement of losses) and the amount of paid social security contributions - pension, retirement, sickness and accident insurance (unless earlier you indicated them as costs.  Please note that the social security contributions you can either include as costs or subtract from income.  If you pay contributions to the Labour Fund, you can only claim it as costs). You may decrease this income by other deductions, for example on the basis of Article 26 of the Personal Income Tax Act (donations, expenditure for rehabilitation). The revenue round up to the full zloty.  You will receive the tax base.  (If you have any doubts how to calculate social insurance contributions, read the publication).

3. If the tax base does not exceed PLN 85,528, multiply the tax base by tax rate of 18 % and deduct 556,02 (amount decreasing the tax according to the income tax rate ). If your income exceeds the amount of PLN 85 528 —  calculate the surplus, then you multiply the surplus by 32 % and add to it the amount PLN 15.395,04. Do not decrease this amount of tax advance payment by the amount reducing the tax.

4. From this sum of tax deduct the sum of health insurance contributions (7.75 % of the basis of assessment is deductible, the total contribution is 9 %) and thus you will receive the tax due since the beginning of the year.

5. Deduct advances paid in the previous months from the amount of tax due from the beginning of the year. You will receive the amount of tax for a given month/quarter.

6. An advance payment for a given month/quarter round to the nearest zloty.  You will get the amount to be paid to the tax office.

Flat rate tax

The calculation of the advance on income tax -  taxation according to the linear method.

1.First, from the amount of revenue (from the beginning of the year) deduct costs incurred over that period of time.  In this way you will receive the amount of income.

2. From that sum deduct loss from previous years and the sum of paid social security contributions.  Round off the income to the nearest zloty.

3. Multiply the tax base by tax rate of 19 %.  You will receive the amount of the tax.

4. Deduct the sum of health insurance contributions from tax (it may be deducted 7.75 % of the basis of assessment, the total contribution amounts to 9 %).  You will receive the tax due.

5. From the amount of tax due from the beginning of the year deduct advances paid in the previous months.  You receive the amount of advance tax payment for a given month/quarter.

6. An advance payment for a given month/quarter round off to the nearest zloty.  You will find the amount payable to the tax office.

Lump sum taxation on registered income

An entrepreneur can opt for the monthly or quarterly settlements with the office.  Lump sum for a given month should be paid by the 20th of the following month and for December — within the deadline for submission of tax return.  Lump sum for a given quarter - by the 20th day of the month after the end of the quarter for which the commitment is settled, and for the last quarter - within the deadline for submission of tax return.

Please note that the tax shall be calculated for each month/quarter separately (not cumulatively from the beginning of the year as in the case of general terms or linear method).  How to calculate lump sum?

1. From the amount of income deduct social contributions (paid in the month for which you pay a tax, e.g. when you set up a company in January, ZUS contributions can be taken into consideration only was a lump sum for February). You have the taxable amount (rounded up to the nearest złoty).  If contributions were higher than the revenue, the unused part of the contribution you can settle in the following months. You round up the amount to the nearest zloty.

2. Multiply the taxable amount by the lump sum relating to your activity.  You will receive the amount of tax.

3. Deduct paid health insurance contribution from the tax.  Please note that 7.75 % of the base for the calculation of contributions is subject to deduction.  If the contribution was higher than the amount of tax, the unused part of the contribution you can settle in the following months/quarters. The amount shall be rounded up to the nearest zloty.

Additional information

Please note that deductible from income (revenue) are ZUS contributions actually paid in a given year, irrespective of the year to which they relate to.  If you pay social contributions only in the current year for the past years, they will be deductible in the year of their payment.

Legal basis

Personal Income Tax Act

Share Print