The Ministry of Finance plans to offer entrepreneurs the option to pay personal income tax only after receiving the payment resulting from an invoice issued to the contractor for goods or services. The relevant draft amendment to the law was submitted to the Sejm on August 16 of this year.
Choosing the new tax settlement method will require meeting certain conditions. This solution is intended for entrepreneurs who do not keep full accounting books, settle taxes using the tax scale and flat tax (including those using IP BOX), as well as lump-sum tax on recorded revenues, who are just starting a sole proprietorship or whose revenues from the conducted economic activity did not exceed EUR 250,000 in the year preceding the tax year.
However, receiving part of a given amount due, e.g. in the form of an advance payment, already generates the obligation to pay PIT. The deduction of costs of obtaining revenues would take place at the time of payment of the given invoice, i.e. at the time of their actual incurring.
The described solution is completely voluntary for the entrepreneur and will not affect the current rules governing the need to pay tax after issuing an invoice (accrual method), regardless of whether the amount due from the invoice has already been paid or not.
If an entrepreneur meets the conditions specified by the regulations, to take advantage of the cash PIT, he/she will be required to submit a written statement to the tax office about choosing the cash method by:
- the 20th day of the month following the month in which the economic activity commenced or
- by February 20 of the given tax year - in the case of other entrepreneurs who meet the conditions.
The choice of the cash PIT will be valid until a written revocation of the declaration is submitted (which must be submitted by February 20 of the tax year in which the entrepreneur would like to resign from cash PIT) or until the end of the year in which the entrepreneur met the required conditions.
What else should be remembered
An entrepreneur using the cash PIT will be able to use this method only for transactions with other entrepreneurs who are not related entities, based on issued invoices for goods or services. Revenues from the sale of fixed assets and intangible assets for consideration are not subject to cash method settlement. In addition, the entrepreneur's additional obligations will include: maintaining special records showing invoices subject to cash settlement, monitoring income and cost payments and checking contractors in terms of the status of conducting economic activity. It should also be remembered that if the entrepreneur does not receive payment for goods or services in connection with the issued invoice, in this situation the deadline for recognizing revenue and paying tax will expire after two years from the date of issue of the given invoice.
PwC Commentary
Cash PIT in its assumption would undoubtedly be a form of assistance to new entrepreneurs, allowing them to maintain financial liquidity and reduce burdens in the event of not receiving payments from contractors. Before choosing this new method, it should be considered whether in the individual situation of a given entrepreneur the use of cash PIT will actually improve the entrepreneur's financial flows, or whether it will only be an additional complications, resulting in greater time and expense for the entrepreneur attempting to meet the numerous conditions of the cash PIT.
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