This form of taxation is one of the most frequently chosen in Poland. It applies not only to business income but also to income earned from employment, civil law contracts or benefits received from the Social Insurance Institution (benefits, pensions and disability pensions). For entrepreneurs, it consists in taxing income (and not revenue) according to a two-stage scale. The tax threshold you qualify for depends on your annual income. In determining it, you are entitled to take into account expenses incurred in connection with your business. Read the article to the end and find out how the tax on general principles looks like.
Tax on general principles – 17% and 32%
Tax settlement based on general principles (or settlement according to scale) depends on earned income and looks as follows:
- 17% – up to PLN 85 528 income
- 32% – from 85 528 PLN
Tax according to general rules – advantages and disadvantages
One of the unquestionable advantages of this form of taxation is the possibility to take advantage of tax allowances. Besides it enables joint settlement with spouse. This solution is beneficial in case one of the spouses earns so much that his/her income would cause entry to tax calculated according to higher rate (from 17% to 32%). An unmarried person with a child may settle up as a single parent. Additionally, in this form of tax there is a possibility to take advantage of tax credit.
The disadvantages of this form of accounting include the obligation to keep a Tax Revenue and Expenses Ledger, which is tantamount to more formalities related to company documentation.
Tax based on general rules – Tax allowances
Taxation based on general rules enables you to take advantage of the greatest number of tax reliefs in comparison with other forms of taxation of business activity. In this case you can take advantage of allowances such as:
- for a child,
- Internet tax relief,
- deduction of payments to Individual Retirement Security Account,
- rehabilitation relief,
- for research and development activities,
- foreign tax deduction,
- due to activity in a special investment zone,
- deductions for social and health insurance contributions.