How to keep a KPiR - a book of revenues and expenses?
Tax book of revenues and expenses - KPiR - is used to record economic operations related to revenues or costs. The book is intended solely for tax purposes - it is on its basis that the main tax base is established. See how to keep KPiR compliant.
Who is required to keep the KPiR?
Pursuant to the Act of July 26, 1991 on personal income tax, natural persons, civil partnerships of natural persons are required to keep a tax book of revenues and expenses in a manner ensuring determination of income (loss), tax base and the amount of tax due for the tax year , general partnerships of natural persons and business partnerships.
The indicated entities keep a tax book if their revenues from business activities for the previous tax year did not exceed EUR 2,000,000, converted into the Polish currency, according to the average exchange rate of the National Bank of Poland on the first business day of October of the year preceding the given tax year. In addition, the obligation to keep the KPiR also applies to persons running a farm without employment of employees, members of agricultural production cooperatives and agricultural workers, who carry out economic activity, in person or with the participation of family members remaining in the common household, if the total income from this economic activity does not exceed 10,000 PLN in the tax year.
When does the entity not maintain a KPiR?
The obligation to keep a book of revenues and expenses does not apply to persons who:
- keep accounting books,
- pay the income tax in a flat-rate form,
- they practice the liberal profession of an advocate only in an advocate team,
- they sell fixed assets after liquidation of the activity.
The taxpayer may obtain individual exemption from the obligation to keep the KPiR in cases justified by special circumstances, such as the type and size of the activity performed, age and health condition. In this case, a person running a business shall submit a written application to the tax office (competent for his place of residence) no later than 30 days before the beginning of the month from which the exemption would apply.
Date of establishing and reporting the KPiR operation
The taxpayer is obliged to set up the KPiR (if there is an obligation to keep sales records, also these records) on January 1 of the tax year or on the date of commencement of operations during the tax year.
The regulation on maintaining the KPiR requires that a taxpayer who starts running a business or benefited from flat-rate income tax or kept accounting books in the previous tax year, a notification (in writing) about keeping a book of revenues and expenses to the head of the tax office competent according to the taxpayer's place of residence within 20 days from the date of its establishment.
If the activity is conducted in the form of a civil partnership of natural persons, general partnership of natural persons or a partnership, all partners shall submit this notification to the head of the tax office. The jurisdiction of the office is determined by the place of residence of each of them.
If, at the request of the taxpayer, the maintenance of the KPiR has been entrusted to an accounting office, the taxpayer is obliged to notify the head of the tax office, to whom the notification about keeping the book was submitted, within 7 days from the date of concluding the contract with the accounting office, indicating the name and address of the office and place (address) storing the book and accounting documents related to running the company.
Additional records beyond the KPiR
The taxpayer may be required to keep (including the tax revenue and expense ledger) the following records:
a) records of fixed assets and intangible and legal assets - if the activity uses fixed assets and intangible and legal assets,
b) records of equipment - if he uses assets in his business that have not been included in fixed assets, their value exceeds PLN 1,500 and the period of use is less than a year,
c) sales records, used to enter income not documented by invoices - in a situation where:
commissioned the keeping of the tax book to an accounting office (§ 8 (1) (2) of the above-mentioned regulation),
runs a multi-plant enterprise and has one tax book for all establishments - then these records should be kept in individual establishments (§ 9 (3) of the above-mentioned regulation),
conducts itinerant or door-to-door trade and does not keep the tax book at the place of business (§ 9 (6) of the above-mentioned regulation),
records revenues in the tax book by the 20th day of the following month (§ 30 (3) of the above-mentioned regulation),
d) employee income cards - if he employs employees and pays them their dues from the employment relationship,
e) records of loans and pledged items - when he runs a pawnshop,
f) records of purchase and sale of foreign exchange values - when kept by the bureau de change.
In addition, the obligation to keep other additional records may result from separate provisions, e.g. vehicle mileage records, in the event that a taxpayer uses a passenger car for the purposes of his business, not included in fixed assets, being his private property or property of another person (e.g. a family member).
How to run the KPiR honestly and in a flawless manner?
The taxpayer is obliged to keep the book fairly and in a non-defective manner. A book kept in accordance with the provisions of the regulation and explanations to the book model is considered to be non-defective. The book is considered to be reliable if the entries in it reflect the actual state of affairs.
The book of revenues and expenses is also considered reliable when:
- the unwritten or incorrectly entered amounts of revenue do not exceed a total of 0.5% of the revenue shown in the book for a given tax year or revenue shown in the tax year until the date on which the head of the tax office or the tax inspection authority found these errors,
- the lack of appropriate entries is related to an accident or random event that prevented the taxpayer from keeping the book,
- errors resulted in an increase in the amount of the tax base, with the exception of errors consisting in failure to show or understating the costs of purchasing basic materials, commercial goods and labor costs,
- the taxpayer completed the entries or corrected incorrect entries in the book before the commencement of the inspection by the head of the tax office or by the tax inspection authority,
- incorrect entries are the result of an obvious mistake, and the taxpayer has accounting evidence that meets the conditions specified in the regulations.
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Place of storage of the KPiR
The tax revenue and expense ledger and the documentation on the basis of which entries are made must be permanently located at the place of business or a place indicated by the taxpayer as his seat.
In the case of running a multi-site enterprise, the books must be kept in each site. However, the taxpayer may keep one book in the place indicated as his seat, provided that at least a sales register is kept in individual establishments.
For taxpayers operating in the field of door-to-door trade, the book must be located at the place of business. If the taxpayer keeps a sales record, at least this record must be present at the place of business.
In the event of entrusting the keeping of the tax book to an accounting office, the book along with the documentation should be kept at the seat of the office whose services the taxpayer uses. On the other hand, the taxpayer's duty is to keep sales records at the place of business, unless the taxpayer records the turnover using cash registers within the meaning of the provisions of the Act of March 11, 2004 on tax on goods and services, known as the VAT Act.
Taxpayers obliged to keep tax books shall keep books and related documents until the tax liability expires.
It should be understood, inter alia, tax book of revenues and expenses, records and registers, which are kept for tax purposes by taxpayers, remitters or collectors. On the other hand, the expiry of the limitation period for the tax liability, which thus determines the retention period of the KPiR, generally takes place after 5 years, counting from the end of the calendar year in which the tax payment deadline expired. This is the minimum period which may be extended in connection with the interruption or suspension of the limitation period.
Explanations to the KPiR in accordance with the Regulation of the Minister of Finance of March 31, 2016 on keeping the tax book of revenues and expenses
"When making entries in the book, resulting from the following kept by the taxpayer:
- sales records,
- records of purchase and sale of foreign exchange values,
- records of loans and pledged things,
- records for the purposes of tax on goods and services
- columns 3-5 of the book are not filled in.
Column 1 is intended for entering the next number of entries in the book. The same number should be used to mark the proof constituting the basis for the subscription.
Column 2 should include the day of the month resulting from the document constituting the basis for making the entry (the date of incurring the expense, receipt of goods or income, or the date of the sales statement).
In column 3, the number of the invoice or other proof should be entered. If entries are made on the basis of a daily statement of sales, enter the number of the statement of invoices.
Columns 4 and 5 are intended for entering the names and surnames (company names) and addresses of contractors (suppliers or recipients) with whom transactions concerning the purchase of raw materials, materials, goods, etc. or the sale of finished products (goods) were concluded, if these transactions are documented they are invoices and receipts. These columns are not completed for sales revenue entries based on daily sales statements and internal evidence.
In column 6, enter the types of revenues or expenses. This term should briefly reflect the essence of the economic event, e.g. purchase of sheet metal, payment for nickel plating of the rim, payment of remuneration for the period ............
Column 7 is intended for entering revenues from the sale of goods (commercial goods) and the sale of services.
Taxpayers conducting currency exchange activities enter in this column the monthly amount of income (sale of foreign exchange values) resulting from the records of purchase and sale of foreign exchange values.
In the case of running a business consisting in granting secured loans (in pawn shops), column 7 shows at the end of the month the amount of the commission representing the value of interest repaid in a given month or the difference between the amount obtained from the sale of the pledged items and the amount of loans granted.
Column 8 is intended for entering other revenues, e.g. revenues from the sale of assets for consideration, received contractual penalties, remuneration of the payer.
Column 9 is for entering the total amount of revenue that is accounted for in columns 7 and 8.
Column 10 is intended for entering the purchase of materials and commercial goods according to the purchase price.
Taxpayers conducting currency exchange activities enter in this column the monthly amount of purchased foreign exchange values, resulting from the records of purchase and sale of foreign exchange values.
Column 11 is intended to enter purchase-related side costs, e.g. costs related to transport, loading and unloading, insurance on the go.
Column 12 is intended for entering gross wages paid to employees (in cash and in kind). Remuneration in kind, if the subject of benefits in kind are things or services falling within the scope of the employer's business activity, are entered according to the average prices applied to other recipients, and in other cases - on the basis of market prices used in the provision of services or the provision of goods or rights of the same type. and species, taking into account in particular their condition and degree of wear and the time and place of availability. Entry is made:
a) on the basis of payroll or other evidence, on which the employee confirms with his own signature the amounts of wages received in cash and in kind - in the case of payment of wages at the cash desk,
b) on the basis of other evidence, e.g. a proof that the salary has been transferred to the employee's account - if the salary is not paid at the cash desk.
The column also records remuneration paid to persons under contracts of mandate and contracts for specific specific work.
Column 13 is intended for entering other costs (apart from those listed in columns 10-12). This column includes in particular such expenses as: rent for the premises, payment for electricity, gas, water, central heating, telephone charges, fuel purchases, renovation expenses, depreciation of fixed assets, contributions for retirement and disability insurance for employees in the part financed by the employer, employee accident insurance contributions, value of purchased equipment.Expenses for the use of a passenger car not entered into the register of fixed assets and intangible assets, including one owned by a person running a business, for the purposes of economic activity of the taxpayer should be entered in this column after the end of the month on the basis of a monthly statement of expenses incurred. The sum of expenses included in tax deductible costs, in individual months, determined from the beginning of the tax year, may not exceed the amount resulting from the vehicle mileage records for the same period, i.e. the amount resulting from the multiplication of the number of kilometers of the actual mileage of the vehicle and the rate for one kilometer of mileage, specified in separate regulations by the competent minister.
Entries regarding the costs of a business trip, including the allowances of the owner and persons cooperating with him, are made on the basis of the settlement of these costs drawn up on an internal document, called the settlement of a business trip. The settlement should be accompanied by proofs (invoices) confirming individual expenses. If it was not possible to obtain the proof (invoice), the employee must submit a written statement on the expense made and the reasons for its lack of documentation. They do not need to be documented with invoices for the diet and expenses covered by the lump sum, as well as the costs of traveling by the employee's own car.
Column 14 is intended for entering the total amount of expenses listed in columns 12 and 13.
Column 15 is free. This column may contain other economic problems, apart from those listed in columns 1-13. The column can also be used to enter expenses relating to the revenues of the month or the next year (following years).
From April 8, 2016, an additional column 16 appeared, which is dedicated to the costs of research and development works referred to in Art. 26e of the PIT Act. Importantly, this column should be filled in with all costs of research and development, regardless of how much of them will be deducted from the tax base. The taxpayer must add up these costs at the end of the year. To sum up, in col. 16 of the KPiR - R&D costs, the entire cost value should be included. Importantly, if the given expenses are tax costs, they should be additionally included in a separate column according to their classification.
Column 17 is intended for entering comments regarding the contents of entries in columns 2-16. This column can also be used, for example, to enter collected advances, turnover of returnable packaging. This column may also record revenues actually received by the taxpayer. If taxation in the form of a lump sum on recorded revenues is chosen in the next tax year, the limit of revenues received in the previous tax year in the amount equivalent to EUR 25,000 is a condition for using the quarterly method of paying a lump sum on recorded revenues.
After the end of the month, entries made in a given month should be underlined and the data from columns 7-14 should be summed up. The amounts resulting from the summary should be emphasized. The taxpayer may enter the sums from the beginning of the year to the month preceding the month in the individual columns under the summary of a given month and enter the sum from the beginning of the year in the next item in the individual columns.
If the taxpayer does not summarize the entries for the following months cumulatively from the beginning of the year, after the end of the tax year, he must prepare an annual statement on a separate page in the book. To do this, enter the sums for each month in the appropriate columns and add them.
In order to determine the value of individual components of the physical inventory of materials and goods at purchase prices, the percentage of the purchase side costs (column 11) should be determined in relation to the total value of the purchase of trade goods and recorded materials (in column 10) (sum of the purchase side costs multiplied by 100 and divided by the purchase value). The unit purchase cost should be increased by the indicator determined in this way, and then the value of individual components of the physical inventory should be determined.
The taxpayer may also value the value of materials and merchandise at purchase price, ie without increasing this price by the purchase side cost index. "
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Determining the income based on the entries in the KPiR
To determine the income earned in a given tax year, the taxpayer should, on a separate page of the revenue and expense ledger:
by adding up columns 7 and 8, calculate the total amount of income obtained and enter it into column 9,
calculate the amount of tax deductible costs incurred in a given tax year:
to the value of the physical inventory prepared at the beginning of the tax year, add the value of purchased commercial goods (column 10) and purchase incidental costs (column 11), and then subtract the value of the physical inventory prepared at the end of the tax year,
add the value of other expenses to the above calculated amount (column 14) and subtract the value of salaries in kind in the part in which the expenses (costs) related to salaries in kind were booked in other columns of the revenue and expense ledger (e.g. in catering, costs of purchasing materials and commercial goods used to prepare meals for employees are entered in column 10),
from the value of the income obtained (column 9), subtract the value of tax deductible costs that were incurred in a given tax year.
The resulting difference is the amount of income earned in the tax year.
1. Revenue (column 9): PLN 670,000
2. The amount of tax deductible costs incurred by the taxpayer in a given tax year:
the value of the physical inventory on how to carry out the tax year beginning of the tax year: PLN 35,000
purchase of commercial goods and materials (column 10): + PLN 245,000
purchase side costs (column 11): +8,000 PLN
the value of the physical inventory at the end of the tax year: PLN -45,000
other expenses (column 14): PLN 57,000
wages in kind included in other columns of the book:- PLN 3 700
Total tax-deductible costs: PLN 296,300
3. Determining the income achieved in the tax year:
a) income (point 1): PLN 670,000
b) tax deductible costs (point 2): PLN -296,300
Income: PLN 373,700
The calculation of the basic income at the end of the year is presented above:
Income - Costs = Income
No deductions for ZUS contributions were made.