Income taxes part II
Income tax payers
A very important issue in the subject of income tax is who is obliged to pay it to the Tax Office.
Income taxpayers are natural and legal persons. In the case of the latter, the entities are all legal persons, irrespective of the way in which this personality was acquired and the capital companies in the organization. The entities of this tax may also be organizational units without legal personality, with the exception of companies without legal personality (e.g. general partnerships, partnerships, limited partnerships, limited joint-stock partnerships).
On the other hand, the subject of the tax within the meaning of the Personal Income Tax Act are natural persons who earn income from various sources of income subject to this tax, who reside in the territory of the Republic of Poland or whose temporary stay lasts longer than 183 days. The Act does not define the concept of a natural person, therefore, reference should be made to the concept of a natural person within the meaning of the Civil Code. These regulations stipulate that every human being has legal capacity from the moment of birth. Thus, any natural person, even a minor, may be a taxpayer of personal income tax.
At the same time, it should be noted that the provisions of the Personal Income Tax Act do not apply when natural persons generate income from the following sources:
- income from agricultural activity, with the exception of special departments of agricultural production - then such income is subject to agricultural tax;
- revenues from forest management within the meaning of the act on forests - then such revenues are taxed with forest tax;
- income subject to the provisions on inheritance and donation tax - then such income is subject to inheritance and donation tax;
- income from the division of the joint property of the spouses, which is made as a result of the limitation or abolition of joint property;
- income resulting from activities that cannot be the subject of a legally effective contract, e.g. gambling, stolen goods or other crimes.
Natural persons residing in the territory of the Republic of Poland bear the so-called unlimited tax liability.This means that these persons pay income tax according to the rules set out in Poland on the total income obtained, regardless of whether the sources of income are located in the country or abroad.
A person residing in the territory of the Republic of Poland is a natural person who:
- has a center of personal or economic interests (center of vital interests) on the territory of the Republic of Poland, or
- stays on the territory of the Republic of Poland for more than 183 days in a tax year.
The provisions of the Act provide for a few exceptions to this general rule. Income obtained abroad is excluded from income tax in Poland if an international agreement to which the Republic of Poland is a party provides so.
Income tax is also not collected on income obtained abroad by natural persons who do not have their place of residence in the territory of the Republic of Poland. However, if these persons earn, in the territory of the Republic of Poland, income (revenue), in particular from:
- work performed in the territory of the Republic of Poland on the basis of a service relationship, employment relationship, homework and a cooperative employment relationship, regardless of the place of payment of remuneration,
- activities performed in person on the territory of the Republic of Poland, regardless of the place of payment of remuneration,
- business activity conducted on the territory of the Republic of Poland, located on the territory of the Republic of Poland, real estate, including the sale of such real estate
- it is on this income (revenue) that they pay tax in Poland.
The above rule expresses the so-called limited tax liability. However, this principle may also be corrected by the provisions of agreements on the avoidance of double taxation.
Forms of taxation with personal tax
People running a business, at the very beginning of their adventure with their own company - when submitting the CEIDG-1 application - must decide what form of taxation of their income they choose. There are four options (but not all are equally available):
a) taxation on general principles,
b) flat tax,
c) flat-rate forms of taxation:
- lump sum on recorded revenues,
- tax card.
An entrepreneur who did not choose the form of taxation when registering his business in CEIDG, may do so on the terms provided for in tax laws, i.e. by submitting a declaration (application) to the head of the tax office (Article 9a (2) of the PIT Act), but not later than on the day of obtaining the first income.
In a situation where the taxpayer does not decide otherwise in the application to CEIDG, or does not submit a declaration on the choice of another form, the basic form is taxation according to the tax scale (according to general rules).
The decision on a given form of taxation is not a "lifetime" decision - the legislator provided for the possibility of changing it, but established one very important condition - it should be done by January 20 of the tax year to which the new form is to apply.
When completing the CEIDG-1 application, the entrepreneur also chooses the form of payment of the income tax advance. There are three possibilities - the advance payment will be made:
- every month,
- every quarter,
- in a simplified way.
The simplified advance payment procedure consists in making a monthly advance payment for income tax, calculated not on the basis of the current cumulative income and costs, but on the basis of income obtained two or three years ago. Due to this structure, the simplified advance payment cannot be chosen by entrepreneurs who have just started their business and those who have shown only losses in the last two or three years or have not earned tax-generating income. The simplified advance payment amounts to 1/12 of the calculated tax amount based on the data from the tax return for two or three years back, calculated using the appropriate rate - i.e. the tax scale or the flat tax.
Advance payments are paid by taxpayers who have chosen tax settlement on general terms or with a flat tax. Lump sums are also obliged to settle the tax on a monthly / quarterly basis. In their case, however, it is not an advance payment for income tax, but simply a flat-rate tax for a specific period. The entrepreneur is obliged to calculate the advance payments and due tax himself. The tax office will not do it for him.