Flat tax is a very simple method of accounting for business income with the tax authorities. However, is this form of taxation always beneficial for the entrepreneur? This is what you will find out in our latest article.
Flat tax is a very simple method of accounting for business income with the tax authorities. However, is this form of taxation always beneficial for the entrepreneur? This is what you will find out in our latest article.
Unlike general taxation, the flat tax rate is fixed and is always 19 percent, regardless of the amount of income earned by the entrepreneur. With a flat tax, therefore, there is no need to remember the tax scale, and calculating the amount owed to the Tax Authority is much easier.
This form of taxation pays off for companies that generate income charged (according to the tax scale) at a rate of 32 percent. It also allows for the deduction of the costs of obtaining income, thereby reducing the tax base. From July 1, 2022, it is also possible to deduct health insurance premiums. In the latter case, however, there is an annual limit, which currently amounts to PLN 8,700 and will change in subsequent years.
Sounds good? Yes, but the flat tax also has several disadvantages that make it not always a viable solution. Who can't or shouldn't settle using the flat 19 percent rate?
Flat tax not for everyone
Let's start with the fact that flat tax accounting is not available to every entrepreneur. The legislator has deprived such an opportunity for taxpayers who, in addition to their own business, also provide services to a former or current employer. The work in question here is analogous to that which the entrepreneur performs (performed) while employed as a full-time employee. However, if his services are of a different nature, in the annual settlement of income from full-time employment, you can take advantage of available tax benefits. In such a situation, however, it is necessary to submit two annual returns to the tax authorities.
Another disadvantage of the flat tax is the lack of a tax-free amount, as well as the possibility of deducting a tax-reducing amount. When settling this way, moreover, one cannot benefit from tax credits (for the Internet, children or rehabilitation), nor can one settle jointly with a spouse or as a single parent.
Finally, simple arithmetic tells us that in the case of an annual income of up to PLN 120,000, the flat tax rate is far less profitable than when accounting for income according to the general rules. Moreover, the flat tax must always be paid, regardless of the amount of income earned by the company.
Flat tax - what formalities must be met?
If an entrepreneur wishes to choose a flat tax as his or her form of settlement with the Tax Authority, he or she should declare it on the CEIDG-1 form at the time of business registration. Advances for income tax can be paid monthly or quarterly. However, the latter option is reserved only for start-ups and so-called small taxpayers whose sales revenue (in 2022) did not exceed EUR 2 million.
The first advance payment must be made at the time of income. Subsequent monthly advances must be paid by the 20th of the month for the previous month. The advance payment for December should be paid by January 20 of the following year by the entrepreneur, unless he has already filed the annual PIT-36L return and paid the accrued tax. However, the deadline for delivering the said PIT-36L return to the tax authorities is April 30.
Summary - advantages and disadvantages of flat tax
- Flat tax is easy to calculate and is always 19%
- It is possible to deduct from income the costs of obtaining it
- You can deduct health insurance premiums
- Income received from different sources cannot be combined
- No tax-free amount
- Cannot take advantage of tax credits (for internet, children, rehabilitation)
- You can't settle jointly with your spouse or as a single parent
.jpg)
.jpg)
%20(1).jpg)
