Lump-sum forms of taxation part AND
Who can benefit from lump-sum taxation on recorded revenues?
Lump sum on registered revenues is quite a specific form of taxation of enterprise income, which cannot be used by all taxpayers. As specified in Art. 6 sec. 1 of the Lump-sum Income Tax Act, this form is intended for natural persons who earn income from:
- independent business activity,
- participation in a civil partnership of natural persons or in a general partnership of natural persons conducting business activity.
Pursuant to Art. 9 (1) of the Act, if the taxpayer commences non-agricultural business activity, the declaration on the choice of the form of taxation may be submitted on the basis of the provisions on freedom of economic activity (i.e. indicating the appropriate form of taxation on the CEIDG-1 form), and if the taxpayer has not submitted a declaration on the basis of these regulations - a written declaration is submitted to the head of the tax office with jurisdiction over the place of residence, but not later than on the day of obtaining the first income.
In a situation where an entrepreneur changes the form of taxation into a flat rate tax, then a written declaration on the choice of this form of taxation is submitted to the head of the tax office competent for the place of residence, no later than by 20 January of the tax year.
Who cannot benefit from lump-sum taxation on recorded revenues?
This issue is regulated in Art. 8 sec. 1 of the Act on flat-rate income tax and in accordance with its entry, taxation in the form of a lump-sum on recorded income, as a rule, does not apply to taxpayers:
paying tax in the form of a tax card on the terms set out in Chapter 3,
who, on the basis of separate regulations, benefit from temporary income tax exemption,
earning revenue in whole or in part from:
- running pharmacies,
- activities in the field of lending secured (running pawnshops),
- activities in the field of buying and selling foreign exchange values,
- conducting non-agricultural economic activity in the field of liberal professions other than those specified in art. 4 sec. 1 point 11,
- provision of services listed in Annex 2 to the Act,
- activities in the field of trade in parts and accessories for motor vehicles,
producing products subject to excise duty, on the basis of separate regulations, with the exception of the production of electricity from renewable energy sources,
undertaking activities in the tax year after changing the activities performed:
- independently for business conducted in the form of a partnership with a spouse,
- in the form of a partnership with a spouse for activities conducted independently by one or each of the spouses,
- independently by the spouse for the activity conducted independently by the other spouse
- if the spouse or spouses before the change paid income tax on the basis of general principles for this activity,
commencing activities on their own or in the form of a partnership, if the taxpayer or at least one of the partners, prior to the commencement of business activity in the tax year or in the year preceding the tax year, performed activities falling within the scope of the taxpayer's or company activities under the employment relationship or a cooperative employment relationship.
Tax base - lump sum on recorded revenues
The tax base in the case of the lump sum on recorded revenues is the revenue which is not reduced by the incurred costs of obtaining it.
This does not mean, however, that the taxpayer will not be able to make any deductions. According to Art. 11 sec.1 of the Act, an entrepreneur taxed with a lump sum will be able to deduct from the income:
- expenses specified in Art. 26 sec. 1 of the PIT Act, if they have not already been deducted from income or have not been recognized as tax deductible costs pursuant to the provisions of the Personal Income Tax Act, and
- losses from business activity incurred during the period of using taxation pursuant to the principles set out in the Personal Income Tax Act.
Lump sum rates
With this form of taxation, five lump sum rates can be distinguished: 20%, 17%, 8.5%, 5.5%, 3%. Each of them concerns specific types of activity.
20 percent rate the lump sum applies to income generated in the field of liberal professions.
17 percent rate. includes revenue from the provision of services, including:
- by temporary employment agencies (PKWiU 78.20.1), other related to the provision of employees (PKWiU 78.30.1),
- counseling for children on educational problems (PKWiU ex 18.104.22.168),
- data processing (PKWiU ex 63.11.1), transmitting audiovisual streams via the Internet (PKWiU 63.11.2),
- reproduction of computer information carriers (PKWiU 22.214.171.124),
- intermediation in the wholesale of passenger cars and vans via the Internet (PKWiU 126.96.36.199).
In turn, taxing at the rate of 8.5 percent. are subject to, among others:
- revenues related to fire fighting and fire prevention (PKWiU 188.8.131.52),
- revenues from the provision of pre-school education services (PKWiU 184.108.40.206),
- revenues from the provision of services related to the operation of botanical and zoological gardens as well as nature protection areas and objects (PKWiU 91.04.1),
5.5 percent rate the lump sum includes:
- revenues from manufacturing activities, construction works or in the field of cargo transportation using a fleet of vehicles with a capacity of more than 2 tons,
- commission from commercial activities in the sale of single-use public transport tickets, stamps for monthly tickets, postage stamps, tokens and magnetic cards for vending machines,
- the revenues referred to in art. 14 sec. 2 point 14 of the Income Tax Act.
The lowest rate of 3 percent. are taxed, inter alia, income:
- from catering activities, except for revenues from the sale of beverages with an alcohol content above 1.5%,
- service activities in the field of trade,
- from the provision of services related to animal production (PKWiU 01.62.10.0).
A detailed catalog of the application of the rates can be found in Art. 12 of the Lump-sum Income Tax Act.
It is worth remembering that if the taxpayer obliged to keep records of revenues runs an activity, the revenues from which are taxed at different rates specified in paragraph 1, a lump-sum on recorded revenues shall be determined according to the rate appropriate for revenues from each type of activity, provided that the revenue register is kept in a way that allows for the determination of revenues from each type of activity. In the event that the taxpayer does not keep records in a manner that ensures the determination of revenues for each type of activity, the lump-sum on revenues recorded is 8.5% of revenues, except that in the case of achieving also revenues referred to in art. 12 sec. 1 point 1 and point 2 of the Act, the lump sum is 20% or 17%.
Advantages and disadvantages of a lump sum on registered revenues
The advantages of a lump sum on recorded revenues can certainly include:
- simplified method of keeping tax records,
- lump sum rates lower than for other forms of taxation,
- beneficial for entities incurring low costs.
Apart from the advantages, this form of taxation also has many disadvantages, for example:
- no possibility of joint settlement with a spouse or a single-raised child,
- it is not possible to classify the incurred expenses as tax costs,
- no discount for children,
- it is not intended for every type of activity.