DUTIES OF ACCOUNTING AND TAXES ACCOUNTING
The purpose of accounting is to reliably and clearly present entity’s financial position and profit or loss. Obligations of an entrepreneur in accounting can be divided into three groups:
Polish law doesn’t impose obligation of conducting accounting books on every entrepreneurs. Chosen one can operate only on the basis of tax revenue and expense ledger for the tax purposes (the entities who decided to pay income tax in simplified forms are not obliged even to this). This form is much simpler than traditional accounting and requires fewer formalities. Such possibility, however, have only following entities:
- Bookkeeping and data protection contained in the books of account;
- Methods for inventory and valuation of assets and liabilities during the financial year and at the end of it;
- Reporting obligations
Using this method requires also fulfilling one more condition. Entities’ net revenues from sales of goods, products and financial operations for the previous year must be less than the equivalent in Polish currency of 1 200 000 EURO. However, they still have possibility to keep accounting books. In this case, they must report that to proper fiscal authority.
- natural persons, civil partnerships, general partnerships and professional partnerships,
- persons performing activities on the basis of agency agreements and service agreements,
- persons conducting special agricultural production if they notified their intention to conduct these books,
- clergy, who resigned to pay a flat-rate income tax.
Limited partnerships, limited joint-stock partnerships, and companies always must keep accounting books commonly called a "full accounting" and their accounting has to be carried out according with the Polish Accounting Act. After the end of the year they are obliged to prepare financial statements, which includes a profit and loss account, balance sheet and notes. All these documents shall be submitted to the tax office and registry court. Entities whose financial statements are audited and disclosed, must publish it in the National Court Register of Polish Official Journal - Court and Economic Monitor.
Entrepreneurs are obliged to take care for proper storage of accounting documentation.
Preparing the financial statements is primary duty of the entities. However, there may also be imposed on them other similar duties. In particular, it refers to reports prepared for the Main Statistical Office or the Polish National Bank.
In 2013, Poland and USA signed contract, which states rules concerning avoiding double-taxation. The contract is applicable for following taxes:
Full text of the agreement is available on: CONVENTION
- personal income tax and corporate income tax (Polish taxes)
- federal income taxes and taxes imposed on private foundations (American taxes).
There is no agreement concerning avoiding double-taxation between Poland and USA in case of remaining taxes.
- personal income tax (PIT),
- corporate income tax (CIT),
- tax on inheritance and donations,
- civil law activities tax,
- agricultural tax,
- forest tax,
- real estate tax
- tax on transport means,
- tonnage tax,
- tax on mineral extraction.
- value added tax (VAT),
- excise tax,
- gaming tax.
For the entrepreneurs, the most important of them are the most general ones: income taxes, civil law activities tax and value added tax. They are briefly described below.
Personal Income Tax
Income tax is a personal tax, which means that the taxable person is any natural person. Natural persons, who reside in the territory of Poland, bear unlimited tax obligation. This means that individuals are subject to tax in Poland on the total earned income, both domestic and foreign, regardless ofthe location of sources of income.
The subject of taxation are all kinds of income, with a few exceptions. These are, therefore, any income defined as the excess of total revenue over the cost of obtaining in the tax year, except from incomes expressly exempted from taxation. Loss of sources of income is deductible from income earned in the next five fiscal years from the same source that brought loss. The statute includes examples of taxable income, which includes:
Revenues are received or placed at the disposal of the taxpayer during the calendar year money and the monetary values and the value of cash received benefits in nature.
- business relationship employment,
- activity carried out personally,
- non-agricultural economic activities,
- special agricultural production,
- lease, sublease, tenancy, sub tenancy etc.,
- equity and property rights,
- a sale of the property,
- other sources.
Deductible expenses are all expenses incurred to generate revenue or sustaining or securing sources of income, with the exceptions mentioned in the statute.
The taxable amount of personal income tax is the sum of income from each source of revenue.
In Poland used are various kinds of tax reliefs. These are provided in the taxl aw exemptions, deductions and reductions, whose application reduces the taxable amount or the amount of tax.
Currentlyin Poland there are two tax rates of the personal income tax - 18% and 32% - PLN 85,5 k.
Tax purchasers are primarily employers. It means that they are obliged to pay tax advances of their employees. Also other entities can be tax purchasers. They are commonly obliges to pay some benefits. All these authorities are required during the whole year to calculate and deduct from the taxpayers’ salaries the advance payment of income tax and transferring these amounts to the account of the tax office.
Sole traders are obliged to pay their taxes themselves.
Entrepreneurs are obliged to possess tax revenue and expense ledger. It is an evidence of the bearded costs and received revenue, which is the basis for calculation of the taxable income.
In some cases, the legislator allows for collection of income tax in the simplified forms, involving omission of some parts of tax techniques or application of other method of calculating the tax. Simplified tax forms are generally more favorable than the income tax on general principles. The taxpayers have decreased duties of documenting their activities. The simplified forms in Poland are following:
- Lump sum of registered revenues,
- The tax card,
- Lump sum on the income of the clergy.
Taxpayers of the corporate income tax are:
Partnerships doesn’t have to pay corporate income tax. It makes them attractive from the point of taxes, because only partners bear obligation to pay personal income tax.
- legal persons and limited joint-stock partnership,
- organizational units without legal personality, with the exception of remaining partnerships,
- on certain conditions, also tax capital groups, i.e. groups of at least two commercial companies having legal personality which remain in capital ties.
Taxable entities, established or possess management board in Poland, bear unlimited liability to tax on the total income and regardless of place of its achievement. Limited tax liability, concerning income generated only in Poland, is imposed on taxpayers whose registered office or management board are outside the Polish territory.
In order to determine the taxable income, from the revenue shall be reduced by the deductible expenses. For the purpose of corporate income tax, revenue is defined as all money received by the taxpayer, the monetary values, value of benefits received free of charge, the value of income in nature, the value of canceled and expired commitments and the value of returned debts. Deductible expenses are the same as in case of personal income tax.
If a legal person suffers a loss, it can cover it with the income earned in the next five fiscal years, provided that amount of impairment may not exceed 50% of the loss.
There are a lot of tax exemptions on the grounds of corporate income tax. They have both, subjective and objective character.
The taxable amount is achieved by a legal person income (revenue – deductible expenses) in the tax year after deductions (a form of tax relief, such as donations for public purposes).
The basic tax rate is currently 19% of the taxable amount. Preferential rules of taxation apply in the case of separate rules for the taxation of certain economic activities.
Taxpayers are obliged to self-calculate due monthly tax advances and the tax itself. They are also obliged without a call for it to submit the declaration of monthly amount of income (loss) and make an advance payment (tax payable on the income earned from the beginning of the fiscal year - the total advances due for the previous month).
Taxpayers commencing business activity or small taxpayers (their income from sales, including VAT does not exceed 1 200 000 €) can choose quarterly accounting method. They also have possibility to pay the advances in simplified form in the amount of 1/12 of the tax due for the previous year.
After the end of the tax year the taxable person is obliged to submit a tax return of the income and pay the tax due or the difference between the tax due and the sum paid in advance.
Civil law activities tax
Subject to civil law activities tax are following operations listed in the statute:
Obligation of paying tax arises also on certain conditions in case of change of contracts mentioned above, or issuing the court verdict, which leads to creation the same consequences.
- a contract of sale and exchange of goods and property rights,
- the loan agreement of money or things designated only to species,
- a donation agreement - in the part concerning the acquisition by the recipient debts, burdens or obligations of the donor,
- a contract for life,
- a contract of inheritance division and contracts for the abolition of joint ownership - in the part on reimbursements or subsidies,
- the establishment of a mortgage,
- establishing a payable usufruct, including improper, and payable easements,
- the irregular deposit contract,
- articles of association;
Also in case of this tax, there are a lot of tax exemptions. Most important of them for the entrepreneurs is exempting the contracts mentioned above, when one of its parties is obliged to pay VAT.
The taxable amount is the market value of carried out transactions. The rates are different for particular activities. They vary, from 0,5% to 2%.
Value added tax
This tax are obliged to pay a natural persons, legal persons or organizational units without legal personality, conducting any economic activity independently, regardless of the objectives and results. There are also few specific groups of taxpayers.
Taxpayers are also legal persons or organizational units without legal personality and non-taxable, natural persons, making the occasional intra-Community supply of new means of transport.
A taxpayer who does not possess a business headquarters or a permanent place of business in the territory of a Member State of the European Union, and shall be subject to registration as an active VAT payer, shall appoint a tax representative in Poland.
Tax must be paid from following activities:
It is important that non-taxable are sale of an enterprise or an organized part of the enterprise and the activities that cannot be the subject of a legally effective contract.
- supply of goods in the country,
- supply of services in the country,
- export and import of goods,
- intra-Community supply goods or services,
- intra-Community acquisition goods or services,
- commodities in the event of liquidation of the company.
The taxable amount is determined by the kind of taxed activity. It can be value of turnover, value of commodities or services, cost of providing services, and others.
Currently, the most commonly used tax rate are 23% (basic), 8%, 5%, 0%. The 23% rate is a general VAT rate, applicable unless legislator stated otherwise. The rate of 0% is the actual lack of taxation, with maintaining the right to deduct input tax, relating to those activities. Sales taxed at 0% remains the taxable sales, despite the lack of actual fiscal burden.
VAT is hidden in the price of products. Taxpayers add its value to the price of sold commodities. In the end, tax is actually paid by the consumers.
Construction of the VAT in Poland is very complicated. From basic rules there have been introduced many exceptions. It is worth using consulting a specialized advisor in order to properly fulfill the obligations.