Too low revenue, exceeding obligatory limits or also changing the scale of activity encourage to seek new solutions. Magdalena Kubiak of CashDirector S.A. explains, how to change the form of taxation of business activities.
Available forms of taxation
The default form of taxation is scale taxation. There are 2 rate taxes, which in 2025 year still are 12% on income up to 120 thousand £ per year and 32% above that amount. Taxpayers may also exploit the free amount from tax of 30 tys. zl and from gulg and joint settlement with the spouse. An undeniable benefit of this form is the possibility of deducting the costs of conducting the activity, on the other hand you must take into consider the high tax applicable after the second threshold and health contribution 9% calculated on income.
– Entry in the second tax threshold significantly increases the tax burden on surplus income above 120 000 £. In order to avoid this, it is worth to take the option of gulg and deductions or changing the form of taxation to lump or line tax, if they are more profitable in a detailed situation – emphasizes Magdalena Kubiak, Accountant Leading with CashDirector S.A.:
When significantly exceeds the second tax threshold a better solution may be therefore be a linear tax, whose rate which now is 19% is fixed and is independent on received income. This form of taxation is simple, but among its minuses can include the lack
of amount free from tax, lack of joint settlement with the spouse and lack of ability to take
of most available ulgas. The linear tax has a lower rate of health contribution, which is 4.9%
of income.
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Both the tax scale, as and the line tax allow the deduction of costs incurred in connection with the business activity. Such possibility is not used.Entrepreneurs accounting in the form of lump on recorded income. Some branches can however save a lot of savings, because the tax rates take from 2% to 17%, which creates preferential conditions. The health contribution is 9%, and its basis depends on the annual income of the taxpayer and the income threshold to which he belongs.
Important terms – until when can change form of taxation?
Changing form of taxation is possible after previous notification. It must be made by keeping with the deadlines provided by law:
- by 20 day of the month next after the month, in which the first revenue in the tax year. In the vast majority of cases the key will be this 20 February date, because the first revenue is usually recorded in January. The exception is acquiring the first revenue in December of a given year – then because the time to choose the form of taxation is only until end December of that year;
- taxpayers, who still account on Charter tax (withdrawn in 2022 year for new activities and not available for change form), they shall notify their resignation from
this method of taxation by 20 January.
Procedure of notification of change form of taxation
The choice of new form of
taxation should officially be notified. The change is made on the application CEIDG-1, which must be submitted to any City, Municipality or also
internet through website business.gov.pl. Information will also be transmitted to the Treasury Office, therefore entrepreneurs do not have to submit additional notifications and statements.
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Limitations in choosing the new method of settlement
by choosing the new form of taxation, you have to reckon with some constraints. These are resulting from the specific activity and the amount of income, among others. Example.A lump sum is not available to practitioners or entrepreneurs providing services to the former employer, if the contract for work was in the year of providing services or in the previous year.
Top revenue exceeding the applicable limit (in 2025 year is on 8 569 200,00 PLN) excludes the possibility of continuing settlements in
this form and forces owners of firms to transfer to general or linear tax.
– Lump sum as a simplified form of
taxation seems an attractive solution for taxpayers with low costs. It is but is subject to conditions, which need to be carefully analyzed. If they apply exclusions, it cannot benefit from this settlement – notes Magdalena Kubiak.
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What is worth remembering before the change?
The consequence of choosing a new form of taxation may be not only a change in the tax rate, but also a different from this time the way of calculating and settling the health contribution or the possibility of gulg and deduction. What is important, sometimes it is difficult to predict on one’s own, which will benefit the company real benefit. This is why it is worth taking the help of an accountant in analyzing your individual situation. According to Magdalena Kubiak, such support will help avoid wrong decisions:
– The chosen form of taxation is not repeatable within a tax year, it is worth therefore to think about changing it. Entrepreneurs should get acquainted with available settlement options. To choose the best solution, you can talk with the accountant in charge, who will present different tax scenarios. In addition to this it is also necessary to consider plans for further development of thecompanyandyourindividualsituation.
Checkingthebindingratesandanalyzingthespecificrevenueandcostsareactivities,thatwillfacilitatethechoice.Nolessimportantisindividual.Situationof anentrepreneur-theneedsoftheownerof acompany,forwhosebusinessactivityisthemainsourceofsustenance,aothersuch asasurvivalstudent.theadvancingretireeordevelopingyourowncompanystudent.alsonotlessimportantarethedevelopmentplansofthe entrepreneur,whichimplementedovertheyearmaysignificantlychangetheprofitabilityofa givenformoftaxation.
Currentmarket conditions,increaseordecreaseindemandforsoldproductsandinflationareadditionalaspects,whichin additiontoa soundaccountinganalysisshouldbeconsideredbeforedecidingtochangetheaccounting method.
