A LUMP SUM TAX ON REGISTERED INCOME
A lump sum tax on registered income is a simplified form of settlement of income tax.
The taxable amount shall be revenue without tax deductible costs. From revenues one can deduct paid social insurance contributions, contributions to Individual Pension Insurance Account made during the tax year, up to the level specified in the provisions on individual pension insurance accounts, expenditure for the rehabilitation allowance, expenditure on the Internet, donations for defined objectives. The tax will be reduced, in the first place, by the amount of health insurance contributions paid. You can also benefit from relief to people with revenues generated abroad. Taxable persons paying tax in that form are entitled to 1% lump sum to public benefit organisations.
In this form of tax, it is not possible to make use of so-called child relief, reliefs for R & D activities.
If you use this method, you must keep records of revenues separately in respect of each tax year, equipment register and list of fixed and intangible assets.
Who can choose lump sum taxation
The lump sum may be used by natural persons, civil law partnerships of natural persons and registered partnerships of natural persons. It is intended for small operators and its advantage is simplified accounting.
Lump sum may be paid by taxable persons who start conducting activity and choose this form of taxation, where they had already conducted it, they may choose it if their revenues in the preceding year did not exceed the equivalent of EUR 250,000 (in accordance with the euro exchange rate published by the National Bank of Poland as at the first working day of October in the year preceding the tax year). The upper limit in 2017 amounts to PLN 1,074,400.
Submit a statement on the choice of taxation in the form of a lump sum of registered income to the head of the tax office competent for the place of residence, not later than 20th January of the tax year.
Submit a statement on the choice of taxation in the form of a lump sum of registered income.
If you start conducting a business during the tax year, submit a statement not later than on the day of the first revenue. You can submit your statement directly to the tax office or through a application for entry in CEIDG.
In the case of activity in the form of partnership, a statement on the choice of lump sum shall be submitted by all partners to the heads of the tax offices competent for the place of residence of each of the partners.
Excluding the possibility of a lump sum payment
Taxation in the form of a lump sum on registered income shall not apply to taxpayers with revenues in whole or in part, inter alia, for:
- running pharmacies,
- lending activities (running pawnshops)
- carrying out the business activity in liberal professions other than those laid down in the Act on lump sum on registered income (doctors, dentists, veterinary surgeons, dental technicians, midwives, nurses, translators and teachers who provide education services - lessons per hours),
- activities concerning the purchase and sale of foreign currency,
- activities in the trade of motor vehicle parts and vehicle accessories.
In addition, taxation in this form cannot be used for services such as, inter alia: brokerage in the wholesale of machinery, industrial equipment, fuels, ores, metals and chemicals, legal services, accounting services and the provision of tax advice. The full catalogue of services excluded from lump sum taxation is set out in Annex No. 2 to the Act of 20 November 1998 on lump sum income tax on certain types of income received by natural persons.
You will not be allowed to apply lump sum also in a situation where you changed the activity during the tax year:
- from your own activity to the form of partnership with a spouse,
- from the partnership with a spouse to carried out independently by one spouse or each of the spouses,
- from carried out independently by a spouse to carried out independently by the other spouse - if a spouse (or spouses) before the change paid income tax in accordance with the general rules.
You will not be able to settle on a flat rate basis when you start conducting activity alone or in the form of a partnership, and you or at least one of the partners performed before commencing the activity (in the same or previous tax year) in the context of the employment relationship, the same activities that fall within the scope of what is now your business activity and which you (or your partner) will perfom for the former and current employer.
The tax rates
The tax shall be calculated on the basis of specific rates depending on the type of activity:
- 20 % of the revenue achieved in the liberal professions,
- 17 % of the revenue from the provision of services: reproduction of computer storage media, intermediation in wholesale of cars and light motor vehicles in online and traditional form, sales of spare parts and accessories, parking, relating to accommodation, publishing, management of real estate , rental and leasing, photography, counselling for children with learning problems, etc.
- 8.5 % of the revenue from, inter alia, the service activities, including catering activities in the sale of beverages containing more than 1.5 % alcohol, the income from the rental, lease, tenancy , subtenancy or other agreements of similar nature, provision of pre-school education, etc.
- 5.5 % of the revenue from, inter alia, manufacturing activities, construction, sale of single public transport tickets, postage stamps, etc.
- 3.0 % of the revenue from, inter alia, commercial and service activities and the catering business, with the exception of revenue from the sale of beverages containing more than 1.5 % alcohol by volume, interest on bank accounts held in the connection with pursued economic activity, services related to livestock production, sale of fish from own catches, etc.
The lump sum rate shall be determined according to the type of the business activity. It is possible to tax one of the activities by lump sum tax and other according to other forms of taxation.
It is also possible to use many different rates at the same time. If taxable person does not keep records in a way that ensures setting revenues for each type of activity then lump sum tax on registered income shall be 8.5 % of revenues, and if normally the rate would be higher - it is 20 % or 17 %.
How to settle a lump sum tax
As far as settlements and reporting obligations are concerned, taxable persons are required to pay the tax due to the account of the tax office by the 20th day of the following month after the month for which the lump sum is to be paid and for December - within the period for submission of the return. Taxable persons whose revenues in the preceding tax year did not exceed the amount of EUR 25,000 (in 2017 it is PLN 107,440 = may calculate the tax and pay the tax due on a quarterly basis. In this case, the Head of the Tax Office should be notified of the choice of this payment method by 20th January. Additional information on the quarter settlement in the case of lump sum can be found here.
Taxable persons are obliged to submit to the tax office competent for the place of residence, return on the amount of revenues received in the tax year, the amount of deductions and a lump sum on registered income due - by 31st January of the next tax year on the PIT-28 form.
Lump sum taxation does not provide for the possibility of settlement with a spouse or child ( lack of revenue from activity or its suspension has no bearing).
- The lump sum shall be levied on income, without deduction of costs incurred in the generation of such income, in accordance with the rates applied to the given type of income - 20%, 17%, 8.5%, 5.5%, 3% and 10%.
- The lump sum shall be calculated and paid monthly and those who continue the activity shall have the option of paying the tax quarterly, if in the preceding tax year they did not exceed the amount of revenue which is equivalent to EUR 25,000.
- It is not possible to apply preferences in the form of joint taxation with a spouse or child in the pursuance of receiving income from other sources - the lack of income from the activity or its suspension is irrelevant.