Lump-sum taxation of recorded revenue

Lump-sum taxation of recorded revenue, as one of the taxations schemes available for entrepreneurs who are natural persons, was an interesting option even before 2022 due to the simplicity of its tax accounting. The “Polish Deal” tax reform in 2022 made this form of taxation very popular by imposing relatively beneficial (comparing to other taxation forms) health insurance contributions on this scheme. In this article we present the principles of the lump-sum taxation.

Taxation principles

Lump-sum taxation of recorded revenue is a taxation option available to business revenues generated by:

If the lump-sum taxation is chosen, the revenues of the entrepreneur are subject to taxation. The expenses generally cannot be deducted.

The tax rate of the lump-sum taxation of recorded revenue is ranging from 2% to 17 %.

In this taxation model no tax-free revenue threshold is available.

Tax deductions

You can deduct from the revenues:

Revenue limit – EUR 2 million

You are allowed to apply the lump-sum taxation only, if your revenues gained in the previous year did not exceed the value of EUR 2 million. If you gain revenues as shareholder of a partnership, this limit applies to the sum of the revenues of the shareholders of the company.

The limit of EUR 2 million does not apply to the entrepreneurs starting their business activities in the given year.

Sale to the former employer

If, after you have chosen the lump-sum taxation, you gained revenues from the sale of goods or services to your former employer, that correspond to the activities you carried out in the previous or the ongoing tax year within the employment relationship, you will lose the right to apply the lump-sum taxation on his revenues starting from the day in which you received the revenue in question. In this case you will have to apply the standard taxation (progressive rate 12%/32%) for the revenues gained since then.

Notification to the tax office

In order to apply the lump-sum taxation of recorded revenue, you have to declare the choice of the taxation with the lump-sum taxation of recorded revenue to the competent tax office within the following deadlines:

You do not need to repeat the notification yearly. It will be valid in the following years until you resign from it (which would mean that you will come back to the standard taxation with the progressive rate 12%/32%) or you choose the taxation with the flat rate 19 %. The deadlines for the change of the taxation scheme should be observed – you may submit the notification about the resignation from the lump-sum taxation or the choice of the taxation with the flat rate only until 20th day of February of the year, for which the change is to be applied .

Tax rates

Art. 12 of the Act on the lump-sum taxation of recorded revenue contains a list of services and goods, that may be subject to this scheme, with the applicable tax rate. Below we present some of the services listed therein with the respective tax rates.

Health insurance contributions

If the lump-sum taxation of recorded revenue is chosen, the amount of the health insurance contribution depends on the revenue gained by the taxpayer in the given year

You should remember, that if you exceed one of the thresholds throughout the year, at the end of the year you will have to pay the difference between the monthly contributions due after you exceeded the threshold and the monthly contributions you actually paid for each previous month of the given year.

Example

Sergiey is subject to lump-sum taxation. As of October his aggregated revenue calculated from January exceeded PLN 60.000.

Solution: For the months until October Sergiey paid his monthly health insurance contribution in the amount of PLN 335,94 PLN. Starting from October he has to pay monthly PLN 559,89, since the first threshold was exceeded. At the end of the year he had to pay the difference of PLN 2.015,55 for the first 9 months (9 x [559,89-335,94].

Possibility to apply simplified calculation method

To avoid additional payments at the end of the year, the taxpayers who were carrying out business activities the whole previous year, may use the yearly revenues from the previous year, decreased by the amount of social security contributions, as the basis for the assessment of his monthly heal insurance contribution.

Example

Anders is subject to lump-sum taxation. His revenue of the last year decreased by the social security contributions, amounted to PLN 105.00.

Solution: Anders may choose to pay the monthly health insurance contributions in the amount of 559,89 PLN from the beginning of the year, since the revenues of the last year (minus social security contributions) exceeded the first threshold. .

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