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 the 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

The obligation to pay an advance shall arise from the month/quarter in which the revenue generated since the beginning of the year has exceeded the amount corresponding to the quotient of the amount of the tax reduction referred to in Article 27 (1) (1b) of the PIT Act, and the lowest tax rate determined in the scale referred to in Article 27. In 2017 it is the amount of PLN 3,089 and after taking into account the rules of tax rounding - PLN 3 091. The same amount will apply in 2018.

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. This will give you 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 paid from the beginning of the year (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.

See the article How o settle ZUS contributions in taxes

Flat rate tax

The calculation of the advance on income tax -  taxation according to the flat rate tax..

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 (7.75% of the assessment base is deducted, and the entire contribution is 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 get the amount that you have to pay to the tax office.

NOTE! Starting from 1 January 2018, an entrepreneur is exempt from the obligation to pay income tax advance (with general rules) when the due advance payment (or advance payment on income earned by several consecutive accounting periods) does not exceed PLN 1000.

You may not pay the calculated advance payment if the tax due on the income earned since the beginning of the year after deducting by the sum of advances already paid since the beginning of the year does not exceed PLN 1000. However, if the tax calculated in this way exceeds PLN 1000, the entire amount is paid, i. e. the difference between the tax due on income earned since the beginning of the year and the sum of advances paid since the beginning of the year.

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 obligation 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 flat-rate tax).  How to calculate lump sum?

1.From the amount of income deduct social insurance contributions paid in a given month/quarter. If the contributions were higher than income, you can settle the unpaid part of the contribution in subsequent months/quarter. You can also reduce your revenue by other deductions, e. g. based on Article 26 of the PIT Act (donations made, rehabilitation expenses). You get a tax base (rounded to the full 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, you can settle the unused part of the contribution  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

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