The cash PIT will be available to entrepreneurs whose revenues from independently conducted business activities did not exceed PLN 1 million, and not the equivalent of EUR 250,000 as in the original project – according to changes approved on Thursday by the Sejm Finance Committee.
The Sejm Finance Committee on Thursday considered the draft amendment to the Personal Income Tax Act and certain other acts, along with a self-amendment. The new regulations provide for the possibility of using the cash method PIT by some entrepreneurs.
Most of the provisions of the proposed act are to enter into force on 1 January 2025.
Amendments to the draft on cash PIT
The Commission adopted several amendments to the draft, which were mainly of a clarifying nature, in order to avoid, among other things, doubts as to interpretation.
As it resulted from the discussion, the MPs accepted the change, the consequence of which will be the possibility for entrepreneurs to use the cash PIT for revenues not exceeding PLN 1 million.
The original provision read: “revenues from independently conducted business activity in the year immediately preceding the tax year did not exceed the amount corresponding to the equivalent of EUR 250,000 (approximately PLN 1 million – ed.) (…)”.
During the committee meeting, the MPs argued that the income – for the convenience of entrepreneurs – should be specified in the act in Polish currency, not in euro. MP Sławomir Ćwik (Polska 2050-TD) submitted an amendment indicating the amount of PLN 1.2 million. However, the head of the finance committee, Janusz Cichoń (KO), indicated that during the discussion “there was agreement on a million and let's stick to that”.
Cash PIT for entrepreneurs
The new regulations will allow some entrepreneurs to use the so-called cash PIT. According to this method, the entrepreneur will include revenues and costs in tax terms at the time of receiving payment, and not at the time of issuing an invoice. Even partial payment for goods or services, i.e. an advance payment, prepayment or installment, will be considered revenue. Thus, taxable revenue will arise at the time of receiving all or part of the payment. This method will apply only to transactions between entrepreneurs.
Currently, the principle in personal income tax is the so-called accrual method of determining income from business activity. This means that for entrepreneurs, income from business activity arises on the date of issuing an invoice, performing a service or delivering goods, regardless of whether they have received the payment due to them. As a result, entrepreneurs must pay income tax on income that they have not yet actually received.
According to the project, the cash method will be available to entrepreneurs conducting business sole proprietorship (so this solution will not be used by people running a civil or general partnership), if their revenues in the previous tax year did not exceed PLN 1 million (after the change caused by the amendment) and if they keep a tax book of revenues and expenses; entrepreneurs keeping accounting books will not use this solution. Additionally, the entrepreneur will have to submit a declaration by 20 February (or by the 20th day of the month following the month in which they started their business) that they want to settle their accounts using the cash method. This declaration will also be effective in subsequent years, until it is revoked.
Entrepreneurs using the cash method will also have to keep records of invoices documenting revenues settled using the cash method.
Main image source: Shutterstock