Zero advance income tax payment - settlement rules

Entrepreneurs running a business are required to calculate and pay advances for income tax, regardless of how business activity is taxed. In what periods is it possible to make advance payments for income tax? What if there is a zero advance payment for income tax for a given period? Answer in the article!

Advances for income tax - who pays them?

Pursuant to the Personal Income Tax Act, the taxpayer is obliged to calculate and pay advance income tax in selected periods. The advance payment for income tax is the difference between the tax due on the income obtained from the beginning of the tax year and the sum of advance payments due in the previous months.

The taxpayer has the right to pay advances for income tax in the following periods:

• monthly - then advance payments for income tax should be calculated and paid by the 20th day of the month following the settlement month;
• quarterly - then advance payments for income tax should be calculated and paid by the 20th day of the month following the completed quarter.

Advance payments for income tax are required to be paid by taxpayers who are taxed:

• tax scale - the income tax rate is 17% or 32%, respectively;
• flat tax - the income tax rate is 19%;
• lump sum - in accordance with the amount of the lump sum;
• with a tax card - the amount of advance payment for income tax is determined in advance by the head of the tax office.

In the case of income tax advances, entrepreneurs are not required to submit tax returns for the periods for which the advance is calculated. However, within the specified deadline, you must make a calculation and pay an advance income tax payment.

At the time of making a transfer to the Tax Office due to income tax, the correct payment title must be provided. In the case of advance payments for income tax taxed according to general rules, the symbol will be PIT, while the symbol for the flat tax will be PPL. For taxpayers settling their activities based on the Income Register, the symbol is PPE. The tax resulting from the advance payment should be paid to an individual tax micro-account.

In the case of tax settlement on the basis of a tax card, advance payments for income tax should be paid to the individual bank account of the competent tax office.

Zero advance income tax payment

In the course of running a business, there may be a situation when the tax deductible costs exceed the revenues earned. In this case, at the time of calculating the income tax advance, the amount to be paid will not come out - then it is the so-called zero advance payment for income tax.

In a situation where the calculation of the advance tax does not indicate the amount of tax to be paid, then it is the so-called zero advance payment for income tax. In the case of a zero advance payment for income tax, there is no need to inform the tax office about this fact. There is also no need to submit any explanations.

If, after making the calculations, there is a zero advance payment for income tax, the taxpayer is not obliged to report it to the Tax Office or make payments.

All income tax advances for the entire year will be shown in the annual tax return for the given year.

Example 1.

In his business, Mr. Jan settles income tax on general principles. In October, the value of costs incurred was greater than the revenue achieved - the total costs amounted to PLN 5,000, and the sum of revenues was PLN 3,000. This means that the tax base is negative and amounts to PLN (-2,000), so the advance on income tax for October is zero PLN.

In this case, Mr. Jan is not obliged to submit the declaration to the Tax Office and make a transfer to the Tax Office.

Monthly income tax advances

Monthly income tax advances are the basic frequency of PIT payment. The value of the advance payment should be calculated on a monthly basis in the amount of the difference between the tax due on the income that has been achieved since the beginning of the year, and the sum of advance payments for the previous monthly periods in a given year. The taxpayer does not have to notify the head of the tax office about the choice of the monthly form of calculating income tax advances.

Taxpayers settling income tax on a monthly basis using a tax scale or flat tax are required to pay the due amount by the 20th day of the month for the previous month.

The advance for income tax for the last month of a given tax year should be calculated and paid by the 20th day of the month after the settlement period, i.e. by January 20 of the following year. Submitting the annual tax return for the previous tax year by January 20 does not release the taxpayer from calculating and paying the income tax advance payment for the last tax year.

Example 2.

In her business activity, Ms Anna settles PIT tax on general terms on a monthly basis. Therefore, Ms Anna is obliged to calculate and pay the advance payment by the 20th day of the month for the previous period, i.e. the previous month.

This means that Anna calculates the advance on income tax for September 2020 on the basis of the revenues received and costs incurred by October 20, 2020.

Example 3.

In her business, Ms Magdalena regulates income tax advances on a monthly basis. Is the advance income tax for December to be paid by January 20, or can it be settled in the annual tax return if it is sent to the Tax Office by January 20?

Ms Magdalena is obliged to pay an advance on income tax for December by January 20, 2021, although she will make an annual settlement on the annual PIT-36 declaration by January 20. An annual declaration sent to the office before February 15 is considered to be effectively filed only on February 15.

Quarterly advance income tax payments

As mentioned above, income tax advances in quarterly periods must be paid by the 20th day of the month that follows the completed quarter, for example:

• Q1 (January, February, March) - advance income tax must be paid by April 20;
• Q2 (April, May, June) - the advance payment must be made by July 20;
• 3rd quarter (July, August, September) - the advance payment must be made by October 20;
• IV quarter (October, November, December) - the advance payment must be made by January 20.

The following taxpayers may take advantage of the preference to pay advances for income tax on a quarterly basis:

• who started a business in a given tax year;

• small taxpayers - i.e. taxpayers whose sales value (including the tax amount) in the previous tax year did not exceed the amount expressed in Polish zlotys, corresponding to the equivalent of EUR 2,000,000.

Changes in the method of settling income tax advances from monthly to quarterly should be made at the beginning of the new tax year.

According to Art. 44 sec. 3i of the PIT Act, the change in the method of settling advances for income tax should be notified in the annual tax return PIT-36, PIT-36L and PIT-28 submitted for the tax year in which the monthly method of paying advances was used.

Example 4.

In 2020, Mr. Włodzimierz regulates advances on income tax on a monthly basis. However, from 2021, he would like to settle the PIT tax on a quarterly basis, because it meets the requirements and is a small taxpayer. In this case, from January 1, 2021, Mr. Włodzimierz pays advances for income tax on a quarterly basis, and the notification in PIT-36 will be made for the tax year 2021.

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A simplified form of making an advance payment for income tax

Advance payments in a simplified form may be paid only on a monthly basis by taxpayers taxed on general principles or with a flat tax.

However, not all taxpayers can use the simplified form of paying advances. This type of settlement cannot be used by entrepreneurs who have started running a business:

• in the current tax year;
• in the previous tax year.

Pursuant to Art. 44 sec. 6d of the PIT Act on the selection of a simplified form of paying advances for income tax, the taxpayer is obliged to inform in the submitted annual declaration for the year in which he used simplified advances.

Therefore, there is no obligation to submit an additional declaration to the tax office on the selection of a simplified form of income tax settlement.

In the case of a simplified advance income tax, the advance amount is 1/12 of the tax value, which was indicated in the submitted annual tax return in the previous tax year or in the tax year preceding a given tax year by two years (if there was no income from business activity in the previous year or its amount did not result in the obligation to pay the tax).

Example 5.

Ms. Natalia has been operating since 2019 and settles PIT tax on general terms. In 2021, it would like to regulate income tax advances in a simplified form. In such a situation, Ms Natalia must take into account the income shown in the annual tax return for 2019.

To sum up, an entrepreneur who pays advance payments on a monthly or quarterly basis is obliged to pay the tax within the prescribed period. However, if the so-called zero advance payment for income tax, no payments or reports should be made to the tax office.However, in the case of taxpayers who have declared a simplified form of paying advances on income tax, this will not be the case, because they have to pay a fixed, fixed amount of income tax.