9 January 2025

Cash PIT – new rules for settling costs

Introducing the cash PIT in Poland is one of the key changes entrepreneurs will face starting in January 2025. The new regulations change the way income and expenses are accounted for in business activities, offering entrepreneurs greater flexibility and simplifying the settlement process. What exactly is the cash PIT, and how will it affect entrepreneurs?

Previous rules for settling costs (pre-2025)

Before 2025, entrepreneurs who run a business could settle the costs of obtaining income if they kept a Tax Book of Income and Expenditures (PKPiR). These rules were applied both to income taxed according to the tax scale and to the flat tax. The moment of incurring the cost of obtaining income was the day of issuing the invoice or other evidence constituting the basis for accounting. It was important that entrepreneurs did not have to wait for payment to record the cost – issuing an invoice was enough.

Change in 2025

As of January 1st, 2025, entrepreneurs will have the option of choosing the cash method of settling income and costs. This principle is that the entrepreneur will only show income when payment for it is received, and costs when they are settled. This solution is intended to simplify the flow of documents and adjust tax burdens to the actual financial flows in the company.

In practice, this means that entrepreneurs will not have to show income when the invoice is issued, which in the case of delayed payments often leads to problems with financial liquidity. Instead, the obligation to show income will arise only after receiving payment. The same rule will apply to tax-deductible costs – the entrepreneur will be able to settle them only after they have been settled. Thanks to this solution, entrepreneurs will be able to better manage their tax liabilities and improve cash flow.

Who will be able to use the cash PIT? (Rules)

The new regulations regarding the cash PIT are aimed at entrepreneurs who meet certain conditions. The cash method of settling revenues will be available to people running a business independently, without hiring employees, but with the possibility of hiring them. Another key condition is the revenue limit, which in the year immediately preceding the tax year cannot exceed PLN 1 million. Entrepreneurs keeping accounting books, and not only PKPiR, will not be able to use this form of settlement.

Additionally, entrepreneurs will have to submit an appropriate declaration to the tax office, depending on whether they are already running a business or are just starting it. For entrepreneurs continuing their business activity, the deadline for submitting the declaration is 20 February of each tax year, while for people starting their business, it is by the 20th day of the month after starting the business, and in the case of starting the business in December, by the end of the tax year.

Cash PIT – benefits for entrepreneurs

The introduction of the cash PIT is intended to simplify tax settlements, especially for small and medium-sized enterprises, which often struggle with the problem of late payments. Thanks to the new regulations, entrepreneurs will be able to avoid situations in which they pay tax on revenues that have not yet been paid. This in turn can help to better manage financial liquidity and reduce the risk associated with unpaid receivables.

Cash PIT is also a step towards simplifying tax administration because instead of monitoring the moment of issuing invoices, entrepreneurs will settle at the time of actual payment. From the taxpayer’s perspective, this means fewer formalities and lower administrative burdens.

The reform of the cash PIT, which will come into force in January 2025, is a revolutionary change that will make life easier for entrepreneurs, especially those running small and medium-sized companies. The new rules for settling revenues and costs of obtaining revenues at the time of payment are a solution that will allow for a better adjustment of tax obligations to the actual cash flows in companies. To use this method, entrepreneurs must meet certain conditions and submit an appropriate declaration to the tax office. The introduction of the cash PIT gives entrepreneurs greater flexibility, which will certainly have a positive impact on their business activities.