Change of taxation form – until when?
Although any entrepreneur can change the form of taxation of his company, this is subject to additional conditions. Let’s start with the fact that it is necessary to comply with the deadlines indicated in the PIT Law. An entrepreneur who misses the deadline for changing the form of taxation will have to wait until the following year.
These deadlines vary depending on which form of accounting the entrepreneur wants to start using. So is it possible to change the form of taxation during the tax year? Yes, but only for those converting to a form of lump sum on registered income or flat tax – see below for details.
If an entrepreneur wants to switch to a flat rate or flat tax, he can make the change in the form of taxation by the 20th. day of the month following the month in which he received the first income in the current tax year. If an entrepreneur recorded his first income in December, he can change the form of taxation by the end of the fiscal year.
EXAMPLE
Mr. Christopher established the company in January 2024 – he chose the tax scale, thinking it would be the most favorable solution for him. However, Mr. Christopher’s company did not record its first revenue until February. In the meantime, he learned from his accountant that for his business, a more favorable form of taxation would be the so-called “taxation”. registered lump sum. If Mr. Christopher wants to change the form of taxation, he will be able to do so until March 20, 2024, or only at the beginning of the next fiscal year.
On the other hand, if we are talking about a company that has been operating for a long time, in all likelihood, it will make its first revenue in January. This means that he can declare a change in the form of taxation by February 20 of a given year. In 2024, changing the form of taxation for companies that earned income in January is no longer possible!
If you want to change your settlement to the PIT scale, you can declare the change on your annual return.
Changing the form of taxation to a tax card – is it possible?
In terms of available forms of taxation, big changes came in 2021 and 2022. They were particularly concerned with the tax card – a specific form of accounting that is currently unavailable. The tax card can still only be used by those entrepreneurs who chose it before December 31, 2021 and have used it continuously since then. In other words: the tax card can no longer be chosen – entrepreneurs are left with the general rules, flat tax or lump sum on registered income.
If an entrepreneur uses a tax card and wants to switch to another form of taxation, he can do so until January 20 of each year.
Loss of right to use tax card
A taxpayer may lose the right to use the tax card during the year. This happens if he violates any of the conditions – for example, he starts doing business outside the country, uses subcontractors or opens another business. These conditions have not changed for a long time, so they do not come as a surprise. However, there is another circumstance that can result in the loss of the right to use the tax card. It is about the decision of the tax office.
This decision may be issued as a result of erroneous information provided by the taxpayer in the application for the choice of a form of taxation or on invoices documenting the transactions carried out. The tax office also reacts if the taxpayer fails to inform the head of the US of the occurrence of events causing the loss of the right to use the tax card within 7 days.
Prior to December 31, 2021, each decision of the tax authority had effect until the end of the calendar year in question. This meant that from the moment the decision was received, the taxpayer had to switch to a tax scale settlement – with no option to change to a flat rate or flat tax. In turn, all the contributions he had made up to that point were credited to the contributions made under the general rules. At the beginning of the following year, the taxpayer could apply for a tax card and, if he met the conditions, return to this type of accounting.
Currently, the decision of the tax office is final – once the right to use the tax card is lost once, the taxpayer has no possibility of returning to this form of taxation in the future.
How to change the form of taxation?
The first question for entrepreneurs who want to change their form of taxation is: How do I do it and what documents do I need? Fortunately, a change in the form of taxation does not require the submission of several different forms – in most cases (switching to flat tax or settling under the general rules) it is enough to update the data available in the Central Register and Information on Economic Activity. Forget about driving to the office and standing in lines – updating the CEIDG-1 form can be done online, for example, by logging in through the Trusted Profile.
Important!
Updating the CEIDG-1 form, you will certainly hit the necessary field to fill in called “date the change occurred.” Enter the date of January 1 of the current year in this field, even if you fill out the application in mid-February. The change you are requesting also covers the period in which your company recorded its first revenue for the year.
Regardless of the form chosen, it is necessary to submit the relevant applications or update the online form by the 20th. day of the month following the month in which the company recorded its first revenue in the fiscal year.
Important!
Once chosen, the form of taxation does not have to be “renewed.” Thus, if you apply for flat-rate accounting, your company will be obliged to account for the flat rate until you apply for another change on your part (that is, at the beginning of the next year at the earliest).
The principle of continuity applies to every form of taxation currently available in the Polish tax system.
Which form of taxation to choose?
If you are still unsure which form of taxation to choose, learn more! Find out for whom each type of taxation is intended and the differences between them.
General rules (tax scale)
The default form of taxation offers 12 percent taxation on income not exceeding PLN 120,000 net per year. If a company settling under the general taxation system earns a higher income, the excess of this amount will be subject to PIT at 32%.
Important!
Exceeding the income threshold of PLN 120,000 during the year means that the taxpayer will pay PLN 10,800 in tax and 32% tax on the excess above PLN 120,000.
Flat tax
It differs from the tax scale in that there are no thresholds. Regardless of the amount of income, an entrepreneur who has opted for a flat tax will pay 19% to the IRS.
Lump sum on registered income
In this variant, the entrepreneur pays tax on income, not including the costs incurred in the calculation. The flat rate can be 2%, 3%, 5.5%, 8.5%, 10%, 12%, 12.5%, 14%, 15% or 17%. However, flat rates are not available to everyone.
Learn more about the forms of taxation available in Poland – read our guide!
