CAN I CHANGE MY TAXATION FORM AFTER THE END OF 2022? The New Deal, along with its subsequent modifications, introduced many changes in the area of personal income tax (PIT), which often have significant practical consequences for taxpayers. One way to actively respond to recent tax changes is the option to change the chosen form of taxation. An important piece of information is that, exceptionally, it is possible to change the form of taxation for 2022 in 2023, i.e., after the end of the tax year!
I WOULD LIKE TO CHANGE MY TAXATION FORM AFTER THE END OF 2022
Due to numerous amendments and uncertainties in PIT, which changed the “rules of the game” during 2022, the legislator exceptionally allowed some entrepreneurs to change their form of taxation after the end of 2022. Let’s consider how to do this and what to watch out for.
Note: The change after the end of the year is only possible concerning the settlement for 2022!
This change is allowed by the Act of June 9, 2022, amending the Personal Income Tax Act and certain other acts (Journal of Laws 2022 item 1265) – the so-called Polish Deal 2.0. If in 2022 an entrepreneur applied the flat tax or the lump sum tax on recorded revenues to their income, they can change the form of taxation to the tax scale (for the entire year 2022 after its end).
Note: The change after the end of the year is only possible from the flat/lump sum tax to the tax scale!
Entrepreneurs settling the flat tax or lump sum tax on recorded revenues who decide to change the form of taxation to the tax scale do so in their annual PIT return in 2023 (submitting PIT-36 instead of PIT-36L/PIT-28).
THE ESSENCE OF CHANGING THE TAXATION FORM AFTER THE END OF 2022
Below we present a brief tabular summary of possible changes:
| Lump Sum on Recorded Revenues | Flat Tax |
| When? | |
| By May 2, 2023 | |
| How? | |
| By submitting only and exclusively the annual PIT-36 return for 2022 | |
| Consequences | |
| Taxation on the Tax Scale for the Entire Year 2022 | Taxation on the Tax Scale for the Entire Year 2022 |
| At the end of the year, one return: PIT-36 | At the end of the year, one return: PIT-36 |
| Change to the tax scale applies only to 2022 | Change to the tax scale applies only to 2022 |
| Can settle costs and revenues according to the scale | Can settle costs and revenues according to the scale |
| Can settle jointly with spouse for 2022 | Can settle jointly with spouse for 2022 |
| Obligatory preparation of the tax book of revenues and expenses (PKPIR) (retroactively) | |
| Note: if for 2022 you (a) file a return late or (b) file another return instead of PIT-36, you will lose the possibility of choosing the tax scale for 2022. | Note: if for 2022 you (a) file a return late or (b) file another return instead of PIT-36, you will lose the possibility of choosing the tax scale for 2022. |
| Important: the health insurance contribution is 9% (the entire year). | |
Note: If you file (a) a return after the deadline or (b) another return instead of PIT-36 (e.g., PIT-28 or PIT-36L) for 2022, you will lose the option to choose the tax scale for 2022.
The information brochure of the Ministry of Finance provides some interesting information (see here).
CONSEQUENCES OF CHANGING THE TAXATION FORM
Changing the form of taxation should be preceded by a thorough numerical analysis. The financial result will be influenced not only by the amount of PIT but also by the amount of health insurance contributions (possible additional payment) and the loss of the ability to deduct it!
Note: Switching from flat tax (lump sum) to the tax scale after the end of the year will cause entrepreneurs to lose the right to deduct health insurance contributions for 2022.
This preference was not extended to taxpayers applying the tax scale. This means that an entrepreneur changing the form of taxation to the tax scale “retroactively” is required to exclude from the costs the health insurance contributions accounted for (or not to include those deducted from income). Therefore, a small tax underpayment may arise (and, of course, the obligation to pay ZUS).
What about the amount of the health insurance contribution?
When settling insurance contributions for April 2023, the entrepreneur will be required to show that they changed the form of taxation (in ZUS DRA). Since the health insurance contribution on the tax scale is 9% of the income, an underpayment may naturally arise. The underpayment must be settled by May 20, 2023, and similarly, an overpayment refund will be requested in May 2023.
Will the arrears from unpaid advances arise?
When preparing the 2022 return, taxpayers will show the advances they actually paid in 2022, calculated according to the rules of the flat tax (or lump sum). They should not recalculate the advances according to the rules of the tax scale. This will not cause arrears on their part.
Lump sum taxpayers – attention!
Entrepreneurs who settled 2022 according to the rules applicable to the lump sum tax on recorded revenues and did not keep a tax book of revenues and expenses must absolutely create such documentation “retroactively”!
WHAT ABOUT THE FOLLOWING YEARS?
Under the current regulations, the decision to change the form of taxation must be carefully considered – not only in the context of 2022 but also in subsequent years (depending on how your revenues, family situation, or planned expenses will develop). It should be remembered that the option to change the form of taxation after the end of the year was allowed exceptionally and only applies to 2022.
CHANGING THE FORM OF TAXATION – HOW CAN WE HELP?
We support our clients through a thorough analysis of their situation and the preparation of appropriate calculations. We help respond timely to tax changes. During consultations, we analyze the structure of revenues and costs to choose the optimal form of taxation, the possibility of joint settlement with a spouse, or the application of specific PIT/ZUS reliefs.
For this purpose, we need a detailed description of the situation and estimated revenues and costs. We show the available options based on numerical data, allowing the client to choose the optimal form of taxation!
Our advice always ends with an individual conversation – during such a consultation, we clarify doubts and discuss minimizing tax risks.
If you have any questions regarding the application of the lump sum tax, please visit www.outsourced.pl .
