Taxation under general rules is the most popular and most widely available form of taxation in Poland. Choosing it allows you, among other things, to benefit from all available tax reliefs.
The form of taxation depends on the amount of income tax
Choosing a form of taxation is one of the main issues to consider at the stage of setting up a business.
Entrepreneurs can choose: taxation under general rules, flat tax, or the lump-sum tax (ryczałt).
The decision is important, because the form of taxation affects how income tax is calculated and, consequently, its amount. It also affects the formalities required in connection with the calculation, determines eligibility for reliefs and deductions, and dictates the type of annual return forms to be filed.
Taxation under general rules has a number of advantages
Due to its wide availability and many advantages, the most popular form of taxation is general taxation. The tax amount is calculated here as a percentage of income – revenue minus expenses.
There are two tax rates: 12% (for income up to 120,000 zł) and 32% (for income exceeding 120,000 zł). The main advantages of the general rules are:
- use of all tax reliefs,
- joint filing with a spouse,
- tax-free allowance.
- Entrepreneurs who choose taxation under general rules are required to keep a Revenue and Expense Ledger (KPiR).
This is a visual table summarising revenue and expenses. The KPiR consists of several columns containing: dates (of incurring expenses, receiving goods, receiving revenue, sales reports), counterparty details, descriptions of economic events, and notes and remarks. In the ledger, each event is assigned a serial number. The KPiR also contains the total revenue and expenses for a given period.
Calculating the income tax advance under general rules
An entrepreneur applying the general rules is required to determine the tax base, i.e. income minus expenses. The advance is calculated on a cumulative basis, based on income earned since the beginning of the year. From revenue, the entrepreneur should deduct paid ZUS contributions and the costs of earning that revenue. After calculating the base, it should be rounded to full zł.
The resulting amount is then multiplied by the appropriate rate (12% up to 120,000 zł) and reduced by the tax-reducing amount (3,600 zł). If your tax base exceeds 120,000 zł, multiply the excess by the 32% rate and add 10,800 zł (90,000 x 12%) to the result. Finally, the advance for a given month is reduced by the amount of advances paid in previous settlement periods. Again, the resulting amount is rounded to full zł.
When should advances be paid?
Tax under general rules is paid monthly or quarterly. The entrepreneur must take care of this by the 20th day of the month following the settlement period. So for monthly payments, tax for e.g. May must be paid by 20 June.
Under the quarterly system, advances are paid to the tax office in the month following the given quarter, i.e. the advance for:
- Q1 – by 20 April
- Q2 – by 20 July
- Q3 – by 20 October
- Q4 – by 20 January
The entrepreneur reports quarterly tax settlements under general rules only in the annual PIT-36 tax return.
This form of taxation does not require any forms to be filed during the year. PIT-36 only needs to be submitted after the end of the tax year (by 30 April).