Tax credit

An entrepreneur who starts a business may take advantage of a tax loan. However, it should be noted that this loan is only available for one tax year.

Tax loan - for whom?

The privilege, which is undoubtedly a tax loan, is nothing more than an exemption from the obligation to pay income tax advances. It concerns taxpayers who started running a business for the first time. In accordance with the provisions of the Personal Income Tax Act, it should be understood as a person who:

• in the year of commencement of this activity as well
• during a period of three years from the end of the year preceding the year of its commencement

she did not conduct non-agricultural business activity on her own or as a partner in a company which is not a legal person, and the spouse of that person did not conduct such activity, provided there was joint property between the spouses at that time (Article 44 (7b)).

However, it should be borne in mind that a tax credit can be obtained by taxpayers who started their business for the first time in the following tax year:

• immediately after the year in which they started to conduct this activity, if in the year of its commencement, this activity was conducted for at least the full 10 months, or
• two years after the year in which they started to conduct this activity, if the condition referred to in point 1 has not been met.

Hence the conclusion that an entrepreneur may take advantage of a tax loan in 2014 if:

• in 2013, he started running a business and ran it for at least 10 months, or
• it started operating in 2012, but ran it for less than 10 months

Necessary conditions to be met

However, not every entrepreneur starting a business for the first time will be able to take advantage of the tax credit. In this respect, it must meet a number of conditions exhaustively listed in the Income Tax Act (Article 44 (7c)).

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• in the period preceding the year of taking advantage of the exemption, income from non-agricultural business activity in the amount equivalent to EUR 1,000 (converted at the average EUR exchange rate, announced by the National Bank of Poland, on the last day of the year preceding the year in which this activity begins);
• from the date of commencement of non-agricultural business activity until January 1 of the tax year of the loan commencement, taxpayers were a small entrepreneur within the meaning of the provisions on economic activity, and in the period preceding the year of taking advantage of the exemption, they employed at least 5 people each month on the basis of an employment contract. converted into full-time jobs.

IMPORTANT Within the meaning of the provisions of the Act on the freedom of economic activity, a small entrepreneur is an entrepreneur who, in at least one of the last two financial years: employed on average less than 50 employees per year, and achieved an annual net turnover from the sale of goods, products and services as well as financial operations not exceeding the PLN equivalent of EUR 10 million, or the sum of assets of its balance sheet prepared at the end of one of these years did not exceed the PLN equivalent of EUR 10 million.

• in their business activities, they do not use fixed assets and intangible assets, as well as other assets of significant value, made available to them free of charge by persons included in tax groups I and II within the meaning of the provisions on inheritance and donation tax, previously used in business business conducted by these persons and constituting their property;

IMPORTANT The significant value is understood as the total value of fixed assets and intangible assets and other assets equivalent to at least EUR 10,000 converted at the average euro exchange rate, announced by the National Bank of Poland, on the last day of the year preceding the year of benefiting from this exemption.

• the taxpayer submitted a declaration on the use of this exemption;
• in the year of benefiting from the exemption, taxpayers are taxed on general principles according to the tax scale.

A taxpayer who meets the legally defined conditions (and wants to take advantage of a tax loan) is obliged to submit a declaration on using a tax loan to the competent head of the tax office. He has to submit them by January 31 of the tax year in which he will use the loan.

Documenting income

When a taxpayer benefits from a tax credit (i.e. he does not pay income tax advances), after the end of the tax year, the taxpayer must submit the PIT-36 annual tax return and show non-taxable income.

IMPORTANT Taxpayers who are entitled to a tax credit show in the annual tax return submitted for the tax year in which they benefited from the exemption, the amount of income (or loss) obtained from non-agricultural business activity. This income should not be combined with those from other sources. Income from non-agricultural business activity is combined with income (loss) from this source, shown in annual tax returns for the amount of income (loss suffered) submitted for five consecutive years immediately following the year in which the taxpayer used the loan - in the amount of 20% of this income in each of these years.

Example 1.

You Z started operating in January 2011.On January 31, she submitted a declaration of using a tax loan to the competent tax office. In the current year, it achieved an income of 100 thousand. zloty. Ms Z meets all the conditions necessary to exercise the right.

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Taking advantage of the tax loan, Ms Z was released from the obligation to pay advances for income tax. However, the income obtained will be shown in the annual tax return. In the next five years (2012-2016), the income will be added to the other income (PLN 20,000 per year) achieved in these years.

Loss of the right to use the tax credit

Pursuant to Art. 44 sec. 7g of the Personal Income Tax Act, taxpayers lose the right to the exemption in a situation where in the year or for the year of using the exemption or in the next five tax years:

1. liquidated business activity or their bankruptcy was announced, including liquidation of assets, or bankruptcy including liquidation of assets of a company that is not a legal person, of which they are partners, or
2. achieved an average monthly income from non-agricultural economic activity in the amount of the PLN equivalent of an amount lower than EUR 1,000, converted at the average EUR exchange rate announced by the National Bank of Poland, on the last day of the previous year, or
3. in any of the months in these years, they reduce the average monthly employment under a contract of employment by more than 10%, in relation to the highest average monthly employment in the year preceding the tax year, or
4. are in arrears in respect of taxes constituting the income of the state budget, customs duties and social security and health insurance contributions referred to in the Act of 27 August 2004 on health care services financed from public funds; Determining or measuring in another form - as a result of proceedings conducted by the competent authority - the arrears on the mentioned titles will not deprive the taxpayer of the right to benefit from the exemption, if the arrears, together with interest for late payment, are settled within 14 days from the date of delivery of the final decision.

IMPORTANT The final administrative decision is: the decision of the first instance authority, in relation to which the deadline for lodging an appeal has expired and has not been restored in the appropriate manner, or a decision issued by an appeal body, or a decision recognized by operation of law as final.

Taxpayers who have lost the right to the exemption are obliged to return to the general principles of tax settlements. If this occurs before the deadline for submitting the tax return for the year in which the taxpayer used the exemption, he is obliged to pay advances. He has no tax arrears and he does not have to charge late payment interest.

If the loss of the right falls after the deadline for submitting the tax return, and within five years after its completion, the taxpayer must immediately pay the tax due together with interest on arrears for the period from the deadline for submitting the tax return (it is calculated from the day following the expiry of the deadline for submitting the tax return by which the taxpayer had to submit it).

IMPORTANT The tax loan may also be used by CIT taxpayers and those paying a lump sum on recorded revenues under the conditions specified in the corporate income tax acts and the act on flat-rate income tax on certain revenues earned by natural persons.