Correct accounting for income tax
Properly calculated advance payment of income tax and its regular payment serves to ensure that at the end of the tax year we do not face unpleasant disappointment. In fact, the income tax will be calculated entirely on the basis of the annual PIT return – after filing it, sometimes we receive a tax refund, and sometimes a surcharge is required. It is through reliable advance payments throughout the year that we can rest assured about the amount of income tax we will have to pay extra in the first few months of the next fiscal year.
When do you have to pay advance PIT?
Taxpayers pay the PIT advance in two options: monthly or quarterly. If an entrepreneur chooses the first option, he should pay by the 20th. day of the month following the month being accounted for (he will pay the advance tax payment for October by November 20). In the case of quarterly settlement, the advance payment should be received in the account of the relevant tax office by the 20th. day of the first month after the end of the quarter (for example, by April 20, when accounting for the first quarter).
Who is affected by advance income tax?
Not everyone has to remit advance PIT – although almost everyone in the labor market pays income tax (exceptions include, for example, the following individuals up to 26. year old, which do not pay income tax up to the amount of income earned equal to PLN 115,528 per year). In the case of employees on a contract of employment or commission, the advance is to be paid by their employers.
The obligation of advance payment of PIT mainly applies:
- Individuals engaged in economic activity;
- Individuals earning income abroad;
- conducting agricultural activities;
- tenants of the property.
Pensions and annuities are also taxed in Poland – advance payments for income tax on these are remitted to the tax office by the Social Insurance Institution.
How to determine the amount of advance income tax?
The method of determining the correct amount of advance PIT payments in business will vary depending on the form of taxation chosen.
The due date for the advance payment does not change – the taxpayer is still required to pay before the 20th day of the month or quarter following the accounting month or quarter.
Advance payment of income tax – general rules (tax scale)
When determining the amount of advance income tax, it is worth remembering that since 2022, legislation has been in effect that reduced the personal income tax from 17% to 12% in the first tax bracket. What’s more, the threshold has been increased to PLN 120,000 (previously it was PLN 85,528). Therefore, our calculations should be as follows:
Advance payment of income tax – calculator
- Income = business income – (minus) expenses cumulatively
- Tax base = Income – Social Security contributions – loss carried forward
- Tax amount = Tax base x 12%
- Tax payable = Tax amount – tax reduction amount – health premiums – advance payments due for previous months during the year.
Important!
The above calculations apply if the income does not exceed the limit of 120,000 zlotys per year.
If the income of a sole proprietor exceeds the aforementioned amount, the excess earned is charged to tax at 32%.
Tax-reducing amount
An important issue in calculating the advance payment is the amount of the tax-reducing amount specified in the above formulas. As of January 1, 2023, the rules regarding the tax-reducing amount have changed significantly, as the tax-free amount has been raised – and significantly, from PLN 8,000 to PLN 30,000.
Today, the tax-reducing amount is PLN 3,600 per year (PLN 300 per month). So let’s consider three standard scenarios.
Variant one: The taxpayer has earned an income of no more than PLN 30,000 per year, so does not pay a single zloty of income tax.
Variant two: the taxpayer earned income in the range of PLN 30,001 – 120,000 per year. In such an arrangement, he will pay income tax at the rate of 12% of the income earned. However, he will deduct the tax-reducing amount of PLN 3,600 from this amount.
Variant three: the taxpayer has earned an income of PLN 120,001 or more. In this variant, the amount of tax to be paid is PLN 10,800 (12% of PLN 120,000, or PLN 14,400 minus the tax-reducing amount of PLN 3,600) and 32% on every zloty of income earned above PLN 120,000.
Advance payment of income tax – flat tax
The calculation of advance income tax if the taxpayer uses the flat tax is not significantly different from the above method – simply use a 19 percent tax rate instead of 12 percent.
Important!
In the case of flat tax, the tax-reducing amount is not applied.
Advance payment of PIT income tax for employees
The obligation to make advance PIT payments also applies to employers. As in previous cases, the deadlines do not change, but only a monthly billing form is usually used.
For an employee on an employment contract
Provisions governing advance PIT payments to employees can be found in the Personal Income Tax Law, in Chapter Seven. Art. 32 details the amount of the aforementioned. advances
- for months in which the taxpayer’s income earned since the beginning of the year at this workplace did not exceed the amount representing the upper limit of the first bracket of the scale – 12% on the income earned in the month;
- for the month in which the taxpayer’s income exceeded the amount constituting the upper limit of the first bracket of the scale – 12% on that part of the income that did not exceed the threshold and 32% on the excess earned;
- for the months following the month in which the first threshold was exceeded – 32% on the income earned in the month.
More details – for example, regarding the joint accounting of the taxpayer with his or her spouse – can be found in the in the text of the law .
For an employee on a contract of work or commission
The income tax rate on wages paid under a civil law contract is also 12%. However, it is important to take into account the possibility of deducting 50 percent of deductible expenses by a taxpayer on a work contract – this possibility is available until the taxpayer’s income from all work contracts does not exceed the amount of PLN 120,000.
Advance payment of PIT tax – registered lump sum
If the taxpayer has opted for a lump sum, and keeps records of income, the calculation of the amount of advance income tax does not take into account deductible expenses.
If an entrepreneur uses a single flat rate, calculations become simple and can be contained in a few paragraphs:
- We start with the amount of revenue for the entire month;
- then subtract the amount of Social Security contributions – this way you get the amount of taxable income;
- This value is multiplied by the flat rate, and the tax-deductible health premium is subtracted from the resulting amount;
- The result of such an equation will be an advance payment of PIT, which must be paid to the account of the relevant tax office.
The situation is slightly complicated when an entrepreneur uses several flat rates:
- First we determine the amount of income;
- Then divide the income earned at each rate by the total income – this way you will know the proportion of accumulated income;
- The resulting percentages are multiplied by the amount of social security contributions;
- The same percentages are multiplied by the amount of the social contribution, thus obtaining the proportions of the Social Security contribution, distributed according to the different sources of income;
- We do the same with deductible health premiums;
- the last step is to calculate the amount of tax for each lump sum separately according to the formula: (income – social contributions) * lump sum rate;
- The obtained results are added up and thus we get the amount of tax to be paid to the account of the competent tax office.
What if there are not enough funds to pay advance income tax?
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