Taxes in business – important information for entrepreneurs

 Choosing a form of taxation for a business

Running a business involves choosing the appropriate form of taxation. In Poland, business owners can choose from several options, including the tax scale, a flat-rate tax and a lump-sum tax on recorded income. Each of these forms has its own specific tax rates for business activities and different rules regarding tax returns.

 The tax scale is the default form of taxation, applied when an entrepreneur does not choose another method. In 2024, the tax scale provides for rates of 12 per cent on income up to 120,000 zł and 32 per cent on income above that amount. There is also a tax-free allowance of 30,000 zł, which reduces the tax liability by 3,600 zł.

 The flat-rate tax is an option for entrepreneurs who prefer a fixed rate of 19 per cent regardless of their income level. This is an attractive option for those on higher incomes, as it does not increase progressively as is the case with the tax scale. However, when opting for the flat-rate tax, business owners must bear in mind that they forfeit the right to claim certain business tax reliefs.

 The flat-rate tax on recorded revenue is another form of taxation based on revenue rather than income. The flat-rate rates depend on the type of business activity and can range from 2% to 17%. This form of taxation is advantageous for entrepreneurs with low tax-deductible costs in their business, as they cannot deduct costs as they would under other forms of taxation.

 When choosing a form of taxation, it is important for business owners to carefully analyse their needs and projected income, and to consult a tax adviser in order to make the most cost-effective decision.

 Income tax returns for business owners

 Each form of business taxation involves different rules for income tax settlement for business owners. Business owners must be familiar with these rules in order to manage their finances effectively and avoid problems with the tax office.

 For taxation according to the tax scale, business owners must submit an annual PIT-36 tax return, taking into account their income, business-related expenses and any applicable tax reliefs and deductions. Advance income tax payments may be made monthly or quarterly, depending on the entrepreneur’s preference.

 In the case of the flat-rate tax, business owners also submit the PIT-36L form. This form of taxation requires accurate record-keeping of income and expenses in order to calculate the tax due. Entrepreneurs must bear in mind that, despite the lower rate, they do not have access to most tax reliefs, which may affect the total tax liability.

 Under the flat-rate scheme for recorded income, business owners submit the PIT-28 form. In this case, the tax is calculated solely on the basis of income, which makes this scheme less complicated to administer. However, business owners must bear in mind that not all types of business activity can be taxed under the flat-rate scheme, and the choice of this scheme must be notified to the tax office.

 Knowledge of tax settlement rules and the deadlines for submitting tax returns is crucial for avoiding financial penalties and optimising tax liabilities.

 Flat-rate tax versus the tax scale

 Choosing between a flat-rate tax and a tax scale is often a dilemma for business owners. Each of these options has its own advantages and disadvantages, which may influence the decision business owners should make.

 A flat tax, with a fixed rate of 19 per cent, is attractive to high-income business owners who wish to avoid higher progressive rates. However, the lack of tax reliefs may mean that, for some entrepreneurs – particularly those with families – the tax scale may prove to be more financially advantageous.

 The tax scale allows for the use of numerous allowances, which can significantly reduce the effective tax rate. For example, there are child allowances, an internet allowance and deductions relating to investments in education. Entrepreneurs must, however, ensure that their income does not exceed the threshold of 120,000 zł, as this would result in a significantly higher rate of 32 per cent.

 When deciding on a form of taxation, entrepreneurs should also consider changing tax regulations and their potential impact on future years. Consulting a tax adviser can help them make the best choice.

 The choice between a flat-rate tax and the tax scale is not a one-off decision. Entrepreneurs may change their tax regime by notifying the tax office within the relevant deadlines before the start of the new tax year.

 Tax-deductible expenses in business

 Tax-deductible business expenses are a key factor in calculating the tax base. Business owners must keep accurate records of their expenses in order to deduct them from their income, thereby reducing the tax due.

 Tax-deductible expenses include expenditure directly related to the business, such as the purchase of materials, office rent or business travel costs. It is important that every expense is supported by an invoice or receipt, which makes it easier to classify it as a tax-deductible expense.

 Business owners should also bear in mind the specific regulations concerning the depreciation of fixed assets, which allow the purchase costs to be spread over several years. This, in turn, reduces the tax base each year.

 Some expenses, although business-related, may not be recognised as tax-deductible costs. For example, expenditure on private health insurance or entertainment expenses are excluded from this category. Entrepreneurs should therefore consult their accountant or tax adviser regularly to ensure that they are classifying their expenses correctly.

 A good understanding of and management of tax-deductible expenses is essential for effective tax planning and minimising the financial burden.

 Tax reliefs for businesses

 Tax reliefs for businesses are a tool that can significantly reduce the tax burden on business owners. Taking advantage of the available reliefs allows for more effective management of a company’s finances and increases its competitiveness in the market.

 One of the most popular types of relief is the research and development relief, which allows for an additional deduction of expenditure related to research and development work. Businesses investing in innovation can reduce their income tax, which encourages further development and the introduction of new technologies.

 Another important relief is the relief for operating in special economic zones. Companies operating in such zones can benefit from preferential tax rates, which encourages investment and the creation of new jobs.

 The internet tax relief is also significant for businesses, as it allows them to deduct expenses related to internet access. In the age of digitalisation and the growing importance of e-commerce, this is a relief that an increasing number of companies are taking advantage of.

 Business owners must be aware of the reliefs available and regularly monitor changes to tax legislation in order to make full use of the opportunities on offer. Professional tax advice can help maximise the benefits derived from tax reliefs.

 How to calculate business tax

 Calculating business tax requires taking into account a number of factors, including the form of taxation, revenue, tax-deductible costs and available reliefs. Each of these factors influences the final amount of tax due.

 The first step is to determine the business’s revenue, i.e. all income from business activities. Next, the business owner must identify all deductible expenses that reduce the tax base.

 The next stage is to apply the appropriate tax rate depending on the chosen form of taxation. Entrepreneurs must also take into account any tax reliefs that may reduce their income tax liability.

 Entrepreneurs taxed according to the tax scale must remember to take the tax-free allowance into account. In 2024, this allowance amounts to 30,000 zł, which reduces the tax liability by 3,600 zł.

 Accurate calculation of business tax is crucial for correct settlement with the tax office and to avoid potential financial penalties. It is worth investing in good accounting software or using the services of a professional accountant.

 VAT for business owners

 VAT (Value Added Tax) is one of the most important taxes for business owners, applying to the majority of commercial transactions. VAT is an indirect tax, which means it is added to the price of goods and services sold.

 Businesses registered as VAT payers must regularly settle their accounts with the tax office by submitting VAT returns and paying the tax due. The standard VAT rate in Poland is 23 per cent, but there are also reduced rates, such as 8 per cent and 5 per cent, for certain goods and services.

 Registration as a VAT taxpayer may be compulsory if a business’s turnover exceeds a certain threshold, or voluntary, which may be advantageous when working with other businesses registered as VAT taxpayers.

 Businesses must also keep accurate records of sales and purchases, which allows them to deduct input tax from output tax. This enables businesses to reduce the amount of VAT payable, which is a key aspect of cash flow management.

 Understanding how VAT works and its impact on business operations is crucial for effective business management. Regular VAT training and consultations with a tax adviser can help business owners gain a better understanding of this issue.

 Summary

 Taxation in business is a complex subject that requires entrepreneurs not only to be familiar with the regulations but also to adopt a strategic approach to choosing a tax regime and managing their finances. It is essential to understand the differences between the tax scale and a flat-rate tax, as well as to be able to make effective use of tax-deductible expenses and tax reliefs.

 Different forms of taxation offer different benefits and require different accounting strategies; therefore, business owners should tailor their approach to the specific nature of their business. VAT is an additional aspect that requires particular attention due to its impact on a company’s cash flow.

 Understanding the rules for calculating tax and the deadlines for submitting returns is essential to avoid financial penalties and optimise the tax burden. Entrepreneurs should regularly monitor changes in tax law and seek professional advice to make the most of the available opportunities.

 Taxes are an integral part of running a business, but with the right knowledge and planning, business owners can minimise their tax burden and focus on growing their business. We encourage you to explore this topic further and make use of the available tools and advice to manage your taxes as effectively as possible.

Frequently Asked Questions

What is the basic form of taxation for business activities?

The standard form of taxation for business activities is the tax scale, which comprises two rates: 12% for income up to 120,000 zł and 32% on the amount exceeding this threshold. Unless you choose a different form, you will be taxed according to this scale.

What forms of taxation are available for sole traders?

The available forms of taxation are the tax scale, a flat-rate tax of 19 per cent, and a lump-sum tax on recorded revenue. The choice of taxation depends on the type of business and the entrepreneur’s individual preferences.

When should you notify the tax office of your choice of taxation method?

If you opt for the 19 per cent tax rate or the flat-rate tax, you must notify the head of the tax office by the 20th day of the month following the month in which you received your first income in the tax year, or by the end of the year if you received your first income in December.

Can you change your tax regime whilst running your business?

Yes, you can change your tax regime, but the change must be made before the start of the new tax year. This requires submitting the relevant notification to the tax office by the specified deadline.

What are the advantages of choosing a flat-rate tax for a business owner?

A flat-rate tax of 19 per cent is advantageous for business owners with high incomes, as it does not increase with income, unlike the tax scale. However, by opting for this scheme, an entrepreneur forfeits the opportunity to benefit from many of the tax reliefs available under the progressive tax scale.