FLAT-RATE TAX OF 19 %
19 % tax on income from the non-agricultural economic activity or from special agricultural production segments is a so-called flat-rate tax.
The nature of the flat-rate tax is that whatever level of income you received from business activities, at all times you pay tax at a rate of 19 %.
If you have not selected during the registration the linear method, but in the end you want to settle in this way, change is possible from a new tax year (calendar year). Applications must be submitted to the head of the tax office by 20th January of a given tax year or before the date of first revenue.
The right to opt for this form of taxation have only taxable persons engaged in an economic activity and only in relation to revenues.
Income taxed in this way may not be combined with income from other sources. Flat rate tax cannot be applied, for example, to the income from the contract of employment and pensions, and revenues from the activity performed personally (which are taxed under the general tax rules - tax scale).
If you conduct business activity taxed by a flat rate tax and at the same time receive income from an employment contract, you must submit separate tax return provided for the taxation by the tax scale (PIT-37).
When it is a good idea to choose 19 % PIT
The biggest impact on the choice of taxation by flat rate of 19 % is a high amount of revenue collected, significantly exceeding PLN 85,528 - amount above which income is taxed at a rate of 32 % (second step of the tax scale). According to estimates, the choice of applying a flat tax of 19 % is economically viable with an annual income of more than PLN 100,000. This is due to, among other things, the inability to settle tax jointly with a spouse or child, and obligatory resignation from tax relief.
Restrictions on the use of reliefs
It is very important that, in the case of flat tax you cannot access the majority of reliefs and tax deductions, which apply to those taxed according to the tax scale. The tax base can be reduced in a given year only by paid social security contributions and insurance of persons collaborating with him/her, and incurred losses and payments made to Individual Pension Insurance Account (IKZE). The tax itself may be deducted from the compulsory health insurance contributions.
As a lump sum payer you can decide to allocate 1 % of your output tax resulting from the annual return to a selected public benefit organisation.
In linear tax, received income is subject to taxation and thus the revenue is reduced by deductible costs.
Record keeping obligations and advance payments
As in the case of taxation according to the tax scale, you must keep records of revenue and costs by means of the revenue and expense ledger or accounting books (larger companies must obligatorily keep accounting books).
In the course of the year, you have to make advance income tax payments on a monthly or (if you are a small taxable person or a taxable person starting business) quarterly basis. Payments are made to the 20th day of the month following the month/quarter to which the advance tax payment relates to.
If you plan to pay advance payments quarterly, you are obliged to inform the competent head of the tax office about the choice of this method by 20th February.
Simplified advance payments
Taxable persons who in the preceding years settled PIT according to flat-rate tax, may pay so-called simplified advance income tax payments. In this case, the advance payment shall be paid on a monthly basis by the 20th of each month for the preceding month. The choice of this form must be declared to the tax office by 20th February (for entities subject to corporate tax, the notification shall be submitted within a period of payment of the first advance for the year in which for the first time they have opted for a simplified form of advance payments)
Taxable persons who have opted for the simplified method, pay income tax advance payments at the rate of 1/12 of the amount of the annual return:
- submitted in the year preceding the tax year in question,
- or in the year preceding the tax year in question by 2 years (if in the year referred to above, output tax was not demonstarted).
After the end of a tax year, the tax return of profits earned (losses incurred) must be submitted to the tax office, by 30th April of the following year. For taxable persons, settling tax in a linear method PIT-36L form is applicable.
It is worth remembering
In case of linear tax:
- revenues from business activity are taxed at a fixed rate of 19 % (no tax-free amount)
- the income taxed according to this form shall not be combined with income taxed pursuant to the tax scale and/or lump sum tax
- advances from the income received in the given year until the 20th month may be paid:
quarterly (applies to small tax payers and start-ups).
Important! An alternative form of advance payments on the income tax is the advance set in a simplified manner. This is an advance which can be paid only monthly, a basis for calculating the advance is income derived from the business activity in the year preceding the year in question by 2 or 3 years. For instance: simplified advance paid in 2017, the income which is base for calculating tax is the profit reported in the tax return for 2015. if the income is lower than PLN 3,089, an income from a return for 2014 will constitute the basis for calculating simplified advance. If also in this return income is lower than PLN 3,089, it is not possible to make advance payments in a simplified form.
- In case of flat-rate tax it is not possible to apply preferences in the form of joint taxation with a spouse or child in pursuance of revenues from other sources - the lack of income from business activity or its suspension is irrelevant .