Record-keeping obligations of pawnshop owners
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Lombard activity consists in granting secured loans. It obliges the taxpayer to keep specific records depending on what legal form he chooses - whether it will be a sole proprietorship or a company. Check what other registration obligations of pawnshop owners are.
As the lombard activity is of a specific nature, the legal provisions exclude taxation in the form of a lump sum on recorded revenues for these entrepreneurs (Article 8 (1) (3) (b) of the Act on flat-rate income tax on certain revenues generated by natural persons). Entities conducting this type of activity will also not benefit from the possibility of taxation with a tax card (Article 23 of the Act).
The exclusion from lump sum taxation results in the fact that the registration obligations of pawnshop owners in the scope of tax are reduced to recording by means of accounting books or a tax book of revenues and expenses on general principles.
Apart from the issue of the form of keeping records, it should be noted that the recorded events should define, in particular, the correct amount of income or loss, respectively, the tax base and the amount of tax due for the tax year.
Registration obligations of pawnshop owners in the scope of PKiPR
Detailed standards for keeping PKPiR are set out in the Regulation of the Minister of Finance of August 26, 2003 on keeping a tax book of revenues and expenses.
Pursuant to the ordinance, taxpayers who perform activities in the field of lending against collateral are obliged to keep records of loans and pledged items. This list should contain at least the following information:
- consecutive number of the entry,
- name and surname of the borrower,
- address, date of granting the loan,
- the amount of the loan granted,
- the amount of the agreed interest in PLN,
- description of the pledged item and its market value,
- date of loan return with interest, date and amount of the loan returned with interest,
- date of return of the pledged item, date of sale of the item and the amount due for this sale,
- the amount of the commission being the value of the interest repaid or the difference between the amount obtained from the sale of the pledged item and the amount of the loan granted.
The amount of the loan granted and the contractual interest as well as the acceptance of the pledged item must be entered into the register immediately.
What is the commission amount in practice? The value of interest repaid in a given month, which for the pawnshop operator is the income or the difference between the selling price of the pledged items and the amount of the loan. The margin determined by one of the above methods should be transferred to the tax revenue and expense ledger at the end of the month - the column: revenue from the sale of goods or services.
Books of accounts in pawn shops
The provisions of the Accounting Act do not describe in detail what the registration obligations of pawnshop owners are, but provide a general outline. First of all, the accounting principles (policy) in an entity should be structured in such a way as to ensure the separation of all events significant for the assessment of the property and financial situation, as well as the financial result.
Loans granted should be entered in the general ledger and on the accounts of auxiliary books, which constitute detailed records of loans granted.
On the other hand, in the case of items received against collateral, until they do not meet the definition of an asset (Article 3 (1) (12) of the Accounting Act), they should be included in the off-balance sheet records of the pledged items.
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Registration obligations of pawnshop owners in the field of VAT
Entrepreneurs who run pawnshops are required to record VAT on general terms.
Due to the specific nature of running a business, there are basically two categories of activities that will have tax effects on the basis of VAT:
- sale of pledged things and things that have not been collected,
- granting cash loans secured by movable property and securities in return for commission.
Under Art. 43 sec. 1 point 38 of the VAT Act, cash loan granting services provided by pawnshops are exempt from this tax.
On the other hand, the sale of pledged and unclaimed items should be treated as an act of supplying goods, subject to general taxation, independent of the loan granting service.
Moreover, pursuant to Art. 109 paragraph. 3 of the VAT Act, taxpayers are required to keep records containing:
- the amounts specified in Art. 90 (amounts recorded for a separate determination of the amounts of input tax on activities for which the taxpayer is entitled to deduct VAT),
- data necessary to determine the subject and base of taxation,
- the amount of tax due,
- the amount of input tax reducing the amount of tax due and the amount of tax to be paid to the tax office or reimbursed from this office, and other data for the proper preparation of the tax declaration, and in the cases specified in art. 120 paragraph 15, art. 125, art. 134 and art. 138 - the data specified by these provisions necessary for the proper preparation of the tax return.
Lombard activity and the cash register
Pursuant to Art. 111 of the VAT Act, taxpayers selling to natural persons who do not conduct business activity and flat-rate farmers are required to keep records of turnover and amounts of tax due using cash registers.
Pursuant to § 2 sec. 1 of the Regulation of the Minister of Finance of November 29, 2012 on exemptions from the obligation to keep records with the use of cash registers in connection with item 23 of the Annex to this regulation, lending money against pawnshops is a financial service that benefits from the exemption from the obligation to record with the use of cash registers until 31 December 2014.
On the other hand, activities related to the sale of pledged items do not benefit from the above exemption. A pawnshop owner who does not meet the conditions necessary to use the exemption is obliged to record, using the cash register, the sale of goods that have not been collected by customers.
Moreover, pursuant to § 4 sec. 1 exemptions from the obligation to record do not apply in the case of:
a) liquefied gas,
b) engine parts (PKWiU 28.11.4),
c) internal combustion engines of a kind used for propulsion of vehicles (PKWiU 29.10.1),
d) bodies for motor vehicles (PKWiU 29.20.1),
e) trailers and semi-trailers; containers (PKWiU 29.20.2),
f) parts of trailers, semi-trailers and other vehicles without mechanical drive (PKWiU 126.96.36.199),
g) parts and accessories for motor vehicles (excluding motorcycles) not elsewhere classified (PKWiU 188.8.131.52),
h) internal combustion reciprocating internal combustion engines of a kind used in motorcycles (PKWiU 30.91.3),
i) radio, television and telecommunications equipment, excluding electron tubes and other electronic components as well as parts for apparatus and devices for sound and image manipulation, antennas (PKWiU ex 26 and ex 27.90),
j) photographic equipment, excluding parts and accessories for photographic equipment and accessories (PKWiU ex 26.70.1),
k) articles made of precious metals or with the participation of these metals, the supply of which cannot benefit from the exemption from tax referred to in Art. 113 paragraph. 1 and 9 of the Act of March 11, 2004 on tax on goods and services, hereinafter referred to as "the Act",
l) CDs, DVDs, audio cassettes, magnetic tapes (including video cassettes), floppy disks, memory cards, cartridges and other analog or digital data carriers containing recorded data or stored computer software packages, including those sold with a license to use ,
m) products intended for use, offered for sale or used as motor fuels or as additives or admixtures to motor fuels, regardless of the PKWiU symbol,
n) tobacco products (PKWiU 12.00), alcoholic beverages with an alcohol content above 1.2% and alcoholic beverages containing a mixture of beer and non-alcoholic beverages with an alcohol content exceeding 0.5%, regardless of the PKWiU symbol, with the exception of goods delivered in the manner specified in item 42 of the Annex to the Regulation.
So if the entrepreneur is engaged in sales of the above-mentioned nature, he must use a cash register.
Persons running a pawnshop activity must remember to keep additional accounting and tax records referred to in the regulations.