With the End of December This Year, Entrepreneurs Can Obtain the Status of a Small Taxpayer. What Does It Mean and How to Obtain Such a Status? For VAT and income tax purposes (PIT or CIT), a small taxpayer status can be granted if sales revenues, including the amount of VAT, do not exceed PLN 5,068,000 by the end of December this year. This status will apply for the entire year of 2014. Small taxpayers can benefit from many advantages, such as one-time depreciation of fixed assets or the cash accounting method for VAT. Some entrepreneurs may recall that last year’s revenue limit was lower.
What is the reason for this change? In the case of VAT, the definition of a small taxpayer is provided in Article 2(25) of the Act of March 11, 2004, on Tax on Goods and Services (consolidated text: Journal of Laws of 2011, No. 177, item 1054, as amended). The amount mentioned there is specified in euros – 1.2 million – and is recalculated annually according to the current exchange rate, which this year was 4.2230 PLN, hence higher than last year (the status of a small taxpayer could be obtained with a revenue of PLN 4,922,000). However, the limit of 1.2 million euros does not apply to all entities. Enterprises such as brokerage houses, companies managing mutual funds, and agents or subcontractors offering services of a similar nature (except for commission contracts) are subject to a limit of only 45,000 euros. Such entities can enjoy the benefits for small taxpayers only if the commission or other remuneration for their services (including tax) does not exceed PLN 190,000.
The Ministry of Finance estimates the number of small taxpayers in Poland at approximately 1.5 million.
One-Time Depreciation
The possibility of using one-time depreciation results from Article 16k(7) of the CIT Act of February 15, 1992 (consolidated text: Journal of Laws of 2011, No. 74, item 397, as amended) and Article 22k(7) of the PIT Act of July 26, 1991 (consolidated text: Journal of Laws of 2012, item 361, as amended). This option is available not only to small taxpayers but also to those who started a business in the given year. A one-time write-off can be made for fixed assets falling within groups 3 to 8 of the classification (e.g., tools, equipment, or movable property). However, passenger cars are not included in this group. The regulations state that the initial value of these assets in the year they are added to the records must not exceed 50,000 euros, which amounts to PLN 205,000 in 2014. However, it is important to remember that this may still change – the Ministry has announced amendments to PIT and CIT, according to which the mentioned amount would increase to 100,000 euros (PLN 422,000) from January 1, 2014, until the end of 2016.
Flat-Rate Tax
Some taxpayers (if their turnover is relatively low) have the option to settle with the Tax Office in a simplified manner – through a tax paid in the form of a flat rate on recorded revenues. In this case, the tax base is the revenue without deducting the costs of obtaining it, and the tax rate depends on the type of business activity. Each year, this form of taxation gains popularity. The conditions for granting these benefits are specified in the Act of November 20, 1998, on Flat-Rate Income Tax on Certain Revenues Earned by Natural Persons (Journal of Laws No. 144, item 930, as amended). According to this act, flat-rate taxation may be used by natural persons conducting non-agricultural economic activity. Again, however, there are exceptions – the act includes a comprehensive list of them, such as pharmacies or pawnshops. Flat-rate taxation may also apply when the activity is conducted in the form of a civil partnership or general partnership. However, it must be a civil or general partnership of natural persons.
In 2014, taxpayers who achieved revenues not exceeding PLN 633,450 (150,000 euros) in 2013 will be able to benefit from flat-rate taxation (in 2013, the limit was PLN 615,300). For the aforementioned civil or general partnerships of natural persons, this applies to the total revenues of all partners. The amount mentioned above is converted from euros based on the average exchange rate announced by the National Bank of Poland on October 1 of the previous year. Often, this is a different rate than the one published on the first working day of October. The first of these rates, if October 1 falls on a non-working day, is determined as the rate from September 30. Such a situation occurred, for example, in 2011. The same limit of 150,000 euros also applies to taxpayers who want to use flat-rate taxation and in the previous year conducted activities either individually or in a partnership, where revenues were taxed only in the form of a lump-sum tax card or for part of the year in the form of a card and for part of the year under general rules. In the latter example, the mentioned limit applies to total revenues.
For both types of entities, revenues taxed in the form of a lump-sum tax card can only be calculated based on issued receipts or invoices.
Flat-Rate Tax Payment Obligations
It is important to remember that opting for flat-rate taxation entails the obligation to calculate monthly liabilities to the tax office and pay them into the treasury’s account by the 20th day of the following month.