Since 1 January 2025, entrepreneurs have been able to use a new method of settling personal income tax (PIT) in Poland, the so-called cash PIT, which links the taxation moment to the actual receipt of payment. The solution has already been implemented and partially tested in practice, and the expansion of its scope from 2026 demonstrates the direction of further changes and an attempt to increase its significance within the tax system.
Introduction
Cash basis PIT was introduced as a response to the widespread problem of payment backlogs and the limited financial liquidity of entrepreneurs. Its primary objective was to allow income tax to be settled only when payment is actually received from a business partner. However, experience from the first period of application of these regulations shows that although the solution addresses genuine business needs, its practical implementation is more demanding than originally anticipated.
What changed from 2026?
A significant change introduced as of 1 January 2026 is the increased accessibility of cash PIT. In particular:
- the revenue threshold allowing taxpayers to apply this method was increased from PLN 1 million to PLN 2 million,
- enabling a broader group of micro and small businesses to benefit from it.
All other key principles governing cash PIT remain unchanged. An entrepreneur may still recognize revenue only when payment for an invoice is received, but no later than two years after the invoice has been issued.
How does cash PIT work?
Cash PIT is an alternative to the accrual accounting rules that generally apply to income tax. Under the cash basis model:
- revenue arises only when payment is received,
- a tax-deductible expense may be recognized only once it has actually been incurred (paid),
- the solution applies exclusively to business-to-business (B2B) transactions documented by invoices.
As a result, entrepreneurs are not required to pay tax on receivables that they have not yet actually collected.
Why has cash PIT not become widely popular?
Despite its favourable design assumptions, interest in cash PIT remains limited. In practice, many entrepreneurs have chosen not to adopt this method, mainly due to its limitations, including:
- applicability only to B2B transactions,
- inability to use the method in transactions with related parties,
- the need to maintain additional records and monitor payments,
- postponement of the recognition of both revenue and expenses,
- formal requirements restricting access to the regime.
Consequently, a solution intended to simplify tax settlements may, in some cases, increase their complexity.
When can cash PIT be beneficial?
Cash PIT may be particularly attractive where an entrepreneur’s business model involves deferred payments. This applies in particular to entities that:
- operate in industries characterized by long payment terms,
- issue invoices with extended payment deadlines,
- are exposed to payment bottlenecks and overdue receivables,
- incur relatively low ongoing operating costs.
In such situations, linking the taxation point to the actual receipt of funds may genuinely improve cash flow and financial liquidity.
When may cash PIT be less optimal?
The application of cash PIT will not always be beneficial. Potential concerns may arise particularly where:
- the entrepreneur incurs substantial costs before generating revenue,
- immediate payments or short payment terms predominate,
- the business involves sales to consumers (B2C),
- minimizing administrative obligations is an important consideration.
It should also be remembered that non-payment does not defer taxation indefinitely. After two years from the date of invoice issuance, the revenue must be recognized regardless of whether payment has actually been received.
Additional points to consider
Choosing cash PIT involves additional obligations on the taxpayer’s side. In particular, entrepreneurs should take into account:
- the necessity of maintaining records of invoices covered by the cash basis method,
- the obligation to continuously monitor payments,
- restrictions regarding the transactions eligible for this method,
- the impact of deferred expense recognition on the overall tax result.
It is also worth noting that cash PIT is not automatically aligned with VAT settlement rules. For taxpayers applying the standard VAT regime, the timing of revenue recognition for PIT purposes may differ from the timing of VAT settlement. Greater consistency exists where entrepreneurs also apply the cash VAT method.
PwC Commentary
Cash PIT is a solution that addresses genuine challenges related to entrepreneurs’ financial liquidity and may serve as an important tool for mitigating the effects of payment backlogs.
At the same time, practical experience shows that its application requires an individual assessment of each taxpayer’s circumstances. Although the extension of the rules from 2026 may increase interest in this solution, it does not change the fact that it will not be optimal in every situation.
Consequently, the decision to adopt cash PIT should be preceded by an analysis of the business’s revenue structure, cost profile, and settlement model with business partners, in order to properly assess the potential tax benefits and risks.
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