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Closing a business - tax consequences

Closing a business is associated with many obligations and tax consequences, both in terms of income tax and tax on goods and services. In order to close the company, a self-employed taxpayer must submit the CEIDG-1 form to the commune office.

First, a list of assets for income tax purposes

When liquidating a business, a taxpayer should pay special attention to Art. 24 sec. 3a of the Personal Income Tax Act. It follows from its content that in such a situation a list of assets should be drawn up as at the date of liquidation of the business activity. This list should contain at least the following information:

ordinal number,
identification (name) of the asset,
the date of acquisition of the asset,
the amount of expenses incurred to acquire the asset,
the amount of expenses incurred to acquire an asset classified as tax deductible costs,
initial value,
depreciation method,
the sum of depreciation charges as at the date of liquidation.

The entrepreneur does not summarize individual columns in the list, let alone include it in the records. The main purpose of its creation is to help in determining the income from the sale of assets after the liquidation of business activities. Pursuant to Art. 14 sec. 2 point 17 lit. and the act, income from economic activity is also income from the disposal of assets for consideration, remaining as at the date of liquidation of the business activity conducted independently.

The income that the taxpayer will be obliged to show as operating income will then be the difference between the income and the expense for the purchase of a given item, not included in tax deductible costs. In the case of fixed assets, when determining the income from their sale, one should take into account the non-depreciated part of depreciation write-offs.

Revenue from the sale of the asset must be reported in the relevant annual tax return:

PIT-36 - when the activity was taxed on general principles,
PIT-36L - when the activity was taxed with a flat tax,
PIT-28 - when the activity was taxed with a lump sum on recorded revenues.

Importantly, when a taxpayer taxed according to the scale in the tax year in which he made the sale, achieved income taxed under general rules on a different basis (full-time employment, retirement pension, disability pension), the settlement is made on one PIT-36 form.

On the other hand, entities whose income was taxed with a flat rate or 19% flat tax must then submit two annual tax returns: PIT-37 and PIT-28 or PIT-36L, respectively.

The entrepreneur should also remember that the above rule of showing income from the sale of assets does not apply to residential real estate used for the purposes of business activity conducted by the taxpayer, to which art. 10 sec. 1 point 8 a-c updof.

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Second - physical inventory

Taxpayers keeping a tax book of revenues and expenses

In accordance with par. 27 of the Regulation on the conduct of the KPiR, an inventory of the nature of commercial goods, basic and auxiliary materials (raw materials), semi-finished products, work in progress, finished products, shortages and waste as of January 1, at the end of each tax year, should be prepared and entered in the book. the day of commencement of business activity during the tax year, as well as in the event of a change of shareholder, change in the proportion of shareholders' shares or liquidation of the business.

The physical inventory, as a rule, should contain at least:

name and surname of the plant owner (company name),
date of the inventory,
sequence number of the physical inventory sheet item,
detailed description of the goods and other ingredients listed in § 27,
unit of measure,
the amount found during the census,
price in PLN and grosze per unit of measurement,
the value resulting from the multiplication of the quantity of the product by its unit price,
the total value of the physical inventory,
the value of the reduction referred to in § 29 subpara. 4d, with an indication of the physical inventory items and items in the book, with which the reduction is related, and
the clause "The list has been completed in position ...", signatures of the persons drawing up the list and the signature of the plant owner (partners).

An entrepreneur drawing up a physical inventory in connection with the liquidation of business activities, in accordance with par. 28 sec. 4 of the Regulation on the KPiR, is obliged to notify the competent head of the tax office about this fact. The information should be submitted in writing at least 7 days before the date of this inventory.

Goods, materials and other components included in the inventory must be valued no later than within 14 days from the date of completion of the inventory.

Physical inventory ingredients	Method of valuation
goods and materials	at purchase or acquisition prices or at market prices on the date of the inventory, if they are lower than the purchase or acquisition prices
semi-finished products (semi-finished products), finished products and shortages of own production	according to the cost of production
utility waste which has lost its original value in use in the course of its activity	according to the value resulting from the estimation taking into account their suitability for further use

The liquidation inventory in the KPiR should be presented by individual types of its components or in one item (total), if a separate, detailed list of its components has been prepared on the basis of the inventory. Both the physical inventory itself and the possible list should be kept together with the book.

The physical inventory prepared in this way will constitute the final inventory for the purpose of the proper determination of income in accordance with Art. 24 sec. 2 of the PIT Act, which should be taken into account when calculating the advance payment for income tax for the last settlement period.

Taxpayers keeping a record of revenues (flat rate)

According to Art. 20 paragraph 1 of the Lump-sum Income Tax Act, taxpayers are obliged to prepare a physical inventory of commercial goods, basic and auxiliary materials (raw materials), semi-finished products, work in progress, finished products, shortages and scraps also on the day of liquidation of the business. However, in the event of notifying the head of the tax office about the closure of a business, taxpayers are obliged to include in the physical inventory also tangible assets related to the activity, other than fixed assets, included in the equipment.

What elements should be included in the physical inventory of the taxable entity in the form of a lump sum? Well, as it results from Art. 20 paragraph 2 of the Lump-sum Income Tax Act, the minimum data that should be included in the lump-sum nature inventory are:

surname and first name of the plant owner (company name),
date of the inventory,
sequence number of the physical inventory sheet item,
detailed description of the goods and other ingredients listed in paragraph 1,
unit of measure,
the amount found during the census,
price in PLN and grosze per unit of measurement,
the value resulting from the multiplication of the quantity of the product by its unit price,
the total amount of physical inventory, and
the clause "The list has been completed on the item ...",
signatures of persons drawing up the list and signature of the plant owner (partners).

The nature inventory of entities keeping a tax revenue and expense ledger generally does not differ from the nature inventory of an entity on a lump sum. In this case, the valuation of the inventory should also be made within 14 days from the date of its completion.

The lump-sum fee measures the goods and other assets included in the inventory at purchase prices or market prices on the date of the inventory, if they are lower than the purchase prices, and when it is not possible to determine the purchase price.

Important!

The purchase price is the price that the buyer pays for the purchased assets, reduced by the tax on goods and services, which is deductible in accordance with separate regulations, and on import - increased by the due duty and excise tax, levy fees and additional customs fees, and in in the case of receipt of an asset by donation or inheritance, the value corresponding to the purchase price of the same or a similar asset.

The taxpayer is obliged to enter a physical inventory in the records of revenues by individual types of its components or in one item (total), if a separate detailed statement of its individual components has been drawn up on the basis of the inventory. This statement should be kept together with the records.

The value of the liquidation inventory does not increase the income earned by the taxpayer in the month of liquidation. It is also not subject to income tax, and thus - the liquidation inventory is not included in the PIT-28 annual tax return.

Both in the event of the end of the tax year as well as the closure of the business activity, the taxpayer must not forget to prepare a list of assets in accordance with the guidelines provided above, as such an obligation is imposed on him by the act.

The taxpayer is taxed in the form of a tax card

As is clear from the content of Art. 36 sec. 1 point 2 of the Lump-sum Income Tax Act, an entrepreneur taxed in the form of a tax card is required to inform in writing the competent head of the tax office about the liquidation of business activity within 7 days from the occurrence of the circumstances causing the changes.

The owner of the company does not have to prepare a physical inventory on the day of closing the business activity, but is obliged to prepare the list of assets referred to in the first point of this article. Importantly, in the event of liquidation of operations during the tax year and reporting this fact to the head of the tax office, the tax in the form of a tax card for the last month of business is collected for the period until the date of cessation of business in the amount of 1/30 of the monthly fee for each day.

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Third, physical inventory for VAT purposes

The obligation to prepare a physical inventory for the purposes of tax on goods and services results from Art. 14 sec. 5 of the VAT Act. It only applies to goods for which the taxpayer was entitled to deduct input tax. Therefore, if the taxpayer had the right to deduct VAT, but did not use it, he will be liable for this tax.

The physical inventory for VAT purposes must show:

goods (including commercial goods, materials, waste),
fixed assets,
equipment,
other tangible assets,

- if the entrepreneur had the right to deduct VAT.

The inventory drawn up by the entrepreneur attaches to the last submitted by him the VAT-7 (monthly settlement) or VAT-7K (quarterly settlement) declaration, showing only the amount of tax due in the item "Amount of tax due on goods and services included in the inventory) by nature, as referred to in Article 14 para. 5 of the Act ".

In addition, closing a business activity is associated with the obligation to submit a VAT-Z form to the Tax Office (notification of the cessation of activities subject to tax on goods and services). The recipient office of this form is the competent office on the last day of performing taxable activities. As a rule, the VAT-Z form should be submitted to the tax office within 7 days from the date of liquidation of the business.

Closing a business and reimbursement of the tax relief for the purchase of a cash register

When liquidating a business, an entrepreneur who has previously used the tax relief for the purchase of a cash register must take into account the necessity to return it. According to Art. 111 sec. 6 of the VAT Act, taxpayers are obliged to return the deducted or reimbursed amounts spent on the purchase of cash registers, if they cease to use them within 3 years from the date of recording commencement. The closure of a business can certainly qualify as the cessation of the use of the cash register.

The taxpayer shall return the previously deducted allowance to the bank account of the competent tax office by the 25th day of the month following:

the month in which the circumstances justifying such a refund arose - with monthly settlement, if the taxpayer settles the tax for monthly periods,
the quarter in which the circumstances justifying such a return arose - with quarterly settlement.