PIT” stands for “Personal Income Tax” in Polish

Table of Contents:

  1. What are the conditions for cash-based PIT?
  2. When will cash-based PIT be implemented?

We already know the assumptions of the cash-based PIT (Personal Income Tax) settlement system intended for entrepreneurs who do not receive payment from their creditors and cannot benefit from bad debt relief. In this way, the moment of revenue recognition will be linked to the actual receipt of receivables, rather than the date of issuing the invoice or performing the service.

What are the conditions for cash-based PIT?

As stated in the description of the draft law, its purpose is to support small-scale entrepreneurs in the area of personal income tax, conducting business activities. Under current law, personal income tax from business activities is generally based on an accrual basis. Income includes amounts receivable, even if not actually received, excluding the value of returned goods, discounts, and rebates.

Cash-based PIT will be available for individual entrepreneurs for tax purposes, provided they are just starting their business or their revenues in the previous tax year did not exceed PLN 500,000. Due to the very low upper revenue limit, this will be a tool mainly for the smallest entrepreneurs, primarily self-employed individuals. Moreover, this method will only be reserved for transactions between entrepreneurs (B2B), not for sales to consumers. Taxpayers who file under the general rules according to the progressive tax scale, the flat-rate tax, will have the right to choose cash-based PIT.

It is worth noting, however, that after two years from the date of issuing the invoice, bill, or concluding an agreement, the taxpayer will be obliged to recognize income from business activities, even if no payment has been received from the counterparty for the goods delivered or services rendered. This deferral in recognizing income may improve the financial liquidity of businesses; however, they must remember that income must ultimately be recognized.

Jakie będą warunki kasowego PIT?

When will cash-based PIT be implemented?

The project for the appropriate amendment is expected to be adopted by the Council of Ministers in the second quarter of 2024. The regulation has a chance to come into force later this year.