Sale to a former or current employer and loss of the right to a lump sum

Lump-sum tax on registered revenues is a form of taxation of business activity, chosen by entrepreneurs mainly due to the simplicity of settlements. People who decide to start running their own business and were previously employed full-time, must comply with the conditions set out in the Act, including cannot sell to a former or current employer. Otherwise, they may lose their entitlement to the lump sum payment.

Lump sum on recorded revenues

The legal regulations covering the rules of lump sum settlements are set out in chapter two of the Act of November 20, 1998 on flat-rate income tax on certain revenues earned by natural persons.

Pursuant to Art. 6 sec. 1, lump-sum tax applies to the income of natural persons from non-agricultural business activity, including when it is conducted in the form of a civil partnership or general partnership. However, the basic rule that allows the use of the lump sum is that the taxpayer, before commencing business in the tax year or in the year preceding it, does not perform activities falling within the scope of the activity under the employment relationship (Article 8 (1) (6)).

Thus, the lump sum on recorded revenues is intended for people who, when deciding to run their own business, do not plan to sell to their current or former employer. Then they can submit the CEIDG-1 application to the city office, where they will choose this form of taxation. However, if they do not comply with the statutory regulations in the course of their business and activities are performed for the employer - they will lose the right to a lump sum.

The only exception are revenues obtained from rental, rental, lease or other contracts of a similar nature, which were taxed in the form of a lump sum.

Switch to general rules

The consequence of not fulfilling the above condition is the obligatory transition to the general principles of income tax settlements - according to the 18% or 32% scale. From the date on which they have made a sale to a current or former employer, taxpayers should start keeping appropriate records and books in order to determine the tax base. Importantly, this basis will only be the income obtained after the loss of the right to settlements in the form of a lump sum.

Annual settlement after losing the right to a lump sum

Losing the right to a lump sum also affects the method of settling income tax at the end of the tax year, as the entrepreneur has to submit separate declarations. In order to settle the income from the period in which he used the lump sum, a PIT-28 declaration must be submitted by January 31 of the following year. On the other hand, income taxed according to general rules (according to the scale) should be accounted for on the PIT-36 declaration. The entrepreneur has until April 30 of the following year for this.

It is worth recalling that in such a case, the taxpayer will also lose the right to settle the tax jointly with the spouse and to take advantage of the preferences of single parents.