At the end of December this year, entrepreneurs may obtain the status of a small tax payer. What does it mean and how this status is obtained?
Small tax payer status for VAT and PIT or CIT may be obtained if revenue from sales including the amount of payable VAT until the above mentioned end of December, does not exceed PLN 5,068,000. This status will be vested for the entire year 2014. There are numerous facilities for a small tax payer: e.g. one-off fixed assets depreciation or the cash desk method of settling VAT.
Probably some entrepreneurs remember that last year the limit of revenue was lower. What brought about this change? In the case of VAT, the definition of a small tax payer is determined in article 2 item 25 of the Act of 11th March 2004 on the Value Added Tax (i.e. the Journal of Laws of 2011, No 177, Item 1054 as amended). The amount specified in this law is in EUR, i.e. up to 1.2 million and each year it is converted in accordance with the current exchange rate which this year equalled PLN 4.2230 thus more than in the preceding year (the status of a small tax payer could have been obtained with revenue amounting to PLN 4,922,000).
However, the limit of EUR 1.2 million does not concern all entities. The limit for businesses such as: brokerage houses or trust funds management companies who are agents, mandataries or other persons rendering similar services (excluding consignment stores) is barely EUR 45,000. This type of entities may take advantage of the preferences available to small tax payers only in the case the amount of the commission or other form of remuneration for the services rendered (including the amount of tax) does not exceed PLN 190,000.
According to the Ministry of Finance there are about 1.5 million small tax payers in our country.
One-off depreciation
The possibility of using one-off depreciation results from article 16k Item 7 of the Act of 15th February 1992 on the Corporate Income Tax (i.e. Journal of Laws of 211, No 74, item 397 as amended) and Article 22k item 7 of the Act of 26th July 1991 on the Personal Income Tax (i.e. Journal of Laws of 2012 Item 361 as amended). It refers not only to small tax payers but also those who started their business activity in a given year.
A one-off deduction may be made in case of fixed assets in groups 3 - 8 of the classification (these may include tools, equipment or movables). This group does not include passenger cars.
According to the regulations, the initial value of these assets in the year in which they were added to the register shall not exceed the equivalent of EUR 50,000, i.e. PLN 205,000 in the year 2014. It should be kept in mind, however, that this amount may change, as the ministry announced amendments to PIT and CIT which increase it to EUR 100,000 (PLN 422,000) from 1 January until the end of the year 2016.
Lump-sum tax
Some of tax payers (unless they achieve a relatively small turnover) may settle with the Revenue Office in a simplified way, by lump-sum tax on revenue. In this situation, the tax basis is the revenue without deduction of tax deductible expenses and the tax rate depends on the type of conducted activity.
Each subsequent year brings an increasing popularity of this taxation form. Conditions according to which the facility is granted are determined in the Act of 20th November 1998 on lump-sum income tax on certain revenues obtained by natural persons (Journal of Laws No 144, Item 930 as amended). Pursuant to this law the lump-sum tax may be used by natural persons conducting non-agricultural economic activity. However again, the provisions contain exceptions of which there is a whole list in the Act, and which for example include pharmacies or pawnshops.
Lump-sum tax may be applied also if activity is conducted in the form of private or registered partnership. However, it is important that it must be a private or registered partnership of natural persons.
In the year 2014, tax payers who in 2013 achieve revenue not exceeding the equivalent of EUR 150,000, i.e. PLN 633,450 (in 2013 this limit was PLN 615,300) will be eligible for lump-sum taxation. In the case of the above mentioned private or registered partnership of natural persons, this amount includes the revenues of all shareholders thus their aggregate amount is taken into consideration.
In this case, conversion of the above mentioned amount into EUR is made according to the average exchange rate announced by the National Bank of Poland on 1st October of the year preceding the given fiscal year. Frequently, it is a different exchange rate than announced on the first business day of October. The first of the mentioned, if the 1st is a holiday, is determined as the exchange rate of 30th September. Such situation took place, for example, in the year 2011.
The limit of EUR 150,000 converted in the same way concerns also those tax payers who intend to use the lump-sum taxation form, and in the preceding year they had conducted business activity individually or in the form of company whose revenue was subject to taxation in the form of fixed amount tax only, or in the form of fix amount tax for a part of the year and according to general principles for the rest of the year. In the second of the listed examples, the mentioned limit refers to aggregate revenue. For both types of entities, revenue subject to taxation in the form of fixed amount may be calculated only on the basis of issued bills or invoices.
It is important to remember that application of the lump-sum settlement imposes the obligation of monthly calculation of payables for the revenue office and paying them to the account of the revenue office until 20th of the following month, or, in the case of December, on the date of submitting the return, i.e. until 31st January of the following year.
Exceptions in this case include only those tax payers whose revenue from individually conducted activity or company revenue in the preceding year did not exceed the amount equivalent to the amount of EUR 25,000 (in 2014 PLN 105,575, in 2013 – PLN 102 550). These tax payers may settle the lump-sum tax quarterly.