Cooperation in the form of B2B

Generally, entrepreneurs have the choice of three basic forms of taxation.

These are:

• tax scale,
• 19 % flat tax rate,
• lump-sum tax.

Each of these forms of taxation has its own specificities and its own tax rates. In addition, from 2022, the form of taxation also affects the amount of health insurance premiums.

Tax scale

The tax scale is a ‘default’ form of taxation of business income. It is characterised by:

• a tax-free amount (up to PLN 30.000,00 per year),
• progressive tax rates (tax rate up to PLN 120.000,00 is 12%, and above that amount – 32%),
• free access (there are no restrictions in using this form of taxation).

In addition, the tax scale allows the taxpayers to benefit from the largest number of tax reliefs and preferences (e.g. child tax allowance, Internet allowance, joint tax settlement with a spouse).

A characteristic feature of the tax scale is also the relatively highest health insurance contribution – as a rule, 9% of income.

19% flat tax rate

By opting for a 19% flat tax rate, entrepreneurs will not be allowed to benefit from a tax-free amount. Neither will they pay 32% PIT. This is because the flat tax amounts to 19% of income, regardless of its amount.

In relation to the tax scale, entrepreneurs taxed with 19% flat tax rate will also – as a rule – pay a lower health insurance contribution: 4.9% of income. Additionally, they have the right to reduce their taxable income by a maximum of PLN 11.600,00 of the health contribution paid.

This form of taxation brings with it a number of restrictions for entrepreneurs. They will neither benefit from part of tax reliefs nor make joint tax settlement with a spouse. In addition, this form of taxation will not be used, among others, by entrepreneurs who provide services to a current or former employer, and the nature of these services corresponds to the activities performed under an employment contract in the same tax year.

Lump-sum tax

The flat tax rate depends on the type of services performed and most often ranges between 8.5% and 17%, although it may also be much lower.

When deciding to opt for a lump-sum tax, entrepreneurs should bear in mind that, unlike the scale and 19% rate flat tax, subject to taxation is revenue. Taxpayers taxed with lump-sum-tax are not allowed to recognise tax deductible costs. They also do not benefit from majority of tax reliefs as well as joint taxation of spouses.