5 information on the flat-rate tax on registered income

Choosing a form of taxation is one of the most important responsibilities when setting up your own Companies . Entrepreneurs often opt for a lump sum of registered income, which is considered a simplified form of income tax (PIT). In this method, it is income that serves as the tax base. What should we know about the flat rate? We have prepared the most important information!

Lump sum on registered income - what is it?

First of all, it is worth explaining the concept of the registered income lump sum. To put it simply: it is a specific form of taxation in which income is the key factor. Its selection guarantees us a simpler method of tax settlement, which significantly facilitates running a business. Instead of a traditional income and expense ledger, we keep separate records of income for each tax year - this also applies to the list of fixed assets and intangible assets, if any, as well as equipment records. In this system, we will be required to keep evidence of the purchase of goods and we do not have the option of accounting for deductible expenses and thus reducing the tax base.

Who can benefit from the lump sum?

Unfortunately, not every entrepreneur has the option of choosing a lump-sum tax on registered income. It is intended only for a specific group of taxpayers - natural persons conducting, for example, commercial activity in the form of a civil partnership, general partnership or independently. There is an additional condition that must be met - obtaining in the year preceding the tax year:

• revenues of no more than €250,000 from wholly independent activities,
• revenues of no more than €2,500,000 raised exclusively from activities in the company.

In a situation where the taxpayer was running his own business in the previous tax year
and at the same time a company in the form of a partnership, the revenues will not be added together for the purpose of calculating the limit. The limits for these two separate activities are set out in separate regulations.

The lump sum cannot be used:

• pawnshops,
• apteki,
• companies involved in foreign exchange trading,
• professionals (excluding the activities of doctors, dentists, veterinary surgeons, dental technicians, feldspersons, midwives, nurses, interpreters and teachers providing hourly services),
• companies trading in motor vehicle parts and accessories,
• advertising agencies, accountancy or legal services.

Does a flat-rate taxpayer have to have a cash register?

The provisions of the VAT Act clearly state the necessity to use a fiscal cash register: this obligation applies to taxpayers engaged in sales to natural persons not conducting business activity and to flat-rate farmers. This provision also applies to entrepreneurs who have decided to opt for a lump sum of registered income. However, flat-rate farmers may benefit from an exemption from the cash register. They are entitled, for example, due to not exceeding the annual turnover limit or conducting mail-order sales. Pursuant to § 3(1)(1) and (2) of the regulation, entrepreneurs whose net turnover from sales to natural persons not conducting business activity and flat-rate farmers in the previous year did not exceed the amount of PLN 20 000 are not required to have a fiscal cash register. E-commerce sellers receiving payment for goods exclusively by bank transfer to a designated bank account also have the option of not using a fiscal cash register, and they are not bound by the aforementioned PLN 20 000 limit.

What are the advantages and disadvantages of a flat rate on registered income?

A flat rate, like any form of taxation, has its major pros and cons. It is worth being aware of these before choosing a flat rate or VAT. These are:

Advantages of a flat rate on registered income:

• easy and transparent accounting - we do not need to keep a revenue and expense ledger,
• we have relatively low tax rates,
• we can settle the lump sum quarterly - subject to certain conditions, of course.

Disadvantages of the registered income lump sum:

• we are not entitled to various types of relief,
• during the tax year, we do not have the option to opt out of this form of taxation,
• we will not account for deductible costs.

Can you lose your right to a lump sum?

Yes, an entrepreneur settling on a flat-rate tax on registered income will be obliged to switch to settling according to the tax scale or flat-rate tax if:

• carries out a transaction which by law should not be taxed as a lump sum,
• exceeds the revenue limit of €150,000 in the tax year.

In the first situation mentioned, the transition takes place immediately, while in the second situation it only takes place from the new tax year. It is worth bearing this in mind.