A new form of settlements for entrepreneurs
wednesday, 29 July 2020
From January 2021, some entrepreneurs will be able to settle the so-called monthly lump sum. Running a company on a lump sum basis is an option for many taxpayers due to the lower tax burden and simplified accounting. What it will consist of and who can use this option are described below.
Lump sum company
Lump sum tax is one of the forms of income taxation PIT available to people running a business. Lump sum taxation may be beneficial for many companies. By choosing a lump sum settlement in 2021, the entrepreneur will pay a fixed monthly amount of CZK 5,740 (approximately PLN 980) to the state treasury. This amount will include:
- 2514 CZK - health insurance
- 100 CZK - symbolic income tax
- 3126 CZK - social and pension insurance
An entrepreneur who decides to use this form of settlement must also meet several conditions:
- Annual business income may not exceed CZK 800,000 (approximately PLN 136,000)
- Cannot be a VAT payer - no possibility to register for VAT
Flat-rate settlement - pluses
- The undoubted advantages of a lump sum on revenues are the lack of the need to keep accounting books. Accounting is simplified and requires only keeping records of revenues, which must be documented with an invoice or other accounting document.
- Low accounting costs
- No tax controls
Flat-rate settlement - cons
- No tax deductible costs - which means that even despite lower tax rates and high costs, this form of taxation will be unprofitable. An entrepreneur, even if he incurs some costs of running a business, cannot deduct them from his income.
- The fixed fee is paid even when the company has made a loss
- In order to be able to apply the flat rate, the limit of the annual income that a taxpayer can obtain is CZK 800,000. If it exceeds it, it must switch to general tax accounting,
- No possibility to take advantage of tax reliefs (e.g. for children, spouses, etc.)
Entrepreneurs who decide to switch to this form of settlements are obliged to inform the Tax Office about the change of the settlement method at the latest < em> by January 10, 2021