As a result of the new regulations associated with the “Polish Deal,” operating a limited liability company for many entrepreneurs will be a much cheaper alternative to operating a business on a flat tax.
After the changes, starting in 2022, a sole proprietor with a 19% flat tax will be charged a health contribution of 4.9% of income, which will not be tax-deductible. One should not lose sight of the burden of the so-called solidarity levy, the amount of which is 4% on the excess over PLN 1,000,000 of income.
If one chooses to conduct business in the form of a limited liability company, it will be subject to CIT at 9% of the income earned (19% for entities other than a small taxpayer), and the distribution of profits to partners involves the collection of a 19% flat rate PIT. On the other hand, partners of a limited liability company are not subject to contribution charges (with the exception of a partner earning income from an appointment as a member of the board of directors, which income will be subject to a health contribution charge starting in 2022), in addition, they are not personally liable for the company’s obligations. What’s more, the limited liability company will be able to opt for a simplified form of taxation – the Estonian CIT, which from 2022 will be much more attractive than at present and, in addition to the benefit of deferring taxation until profit distribution, will also provide a lower level of taxation for the company.
Changing the way of doing business by establishing a limited liability company is not an automatic decision – it requires analysis of each individual case, but in many entrepreneurs it can prove to be a beneficial solution.
