Cash accounting for taxes

From 1 January 2025, cash PIT (cash accounting method) will be available to some sole proprietorship.

Cash-based PIT – what is it?

Recall that currently entrepreneurs recognise revenue on an accrual basis, regardless of when the amount due is paid. This means that on the part of a sole proprietorship, the obligation to pay PIT may arise even before receiving payment for the service rendered / goods sold.

The switch to so-called cash-based PIT will result in the entrepreneur recognising income not at the time of issuing the invoice, but at the time of receiving the payment. Similarly, it is only when the purchase invoice is paid that the entrepreneur will be entitled to recognise tax costs.

Who can benefit from cash-based PIT?

Cash-based PIT will be available to sole proprietors (irrespective of the chosen form of taxation) who:

• from the sole proprietorship achieved in the previous tax year revenues not exceeding the amount of PLN 1 million,
• do not keep books of account in connection with their business activity,
• submit to the head of the tax office, within the statutory deadline, a statement on the choice of the cash accounting method – as a rule, by 20 February, and in the case of a taxpayer starting his business activity during the tax year – by the 20th day of the month following the month in which the activity started.

Cash-based PIT will also be available for those starting a business during the year.

Cash-based PIT will only apply to settlements between entrepreneurs, which are documented by invoices issued within the deadlines specified in accordance with separate regulations. It will not be possible to use this solution for transactions with tax haven entities or related parties.

According to the regulations, only entrepreneurs conducting business ‘independently’ will be able to benefit from the Cash-based PIT. This means that it will not be available to, among others, partners of civil partnerships.

How can we help?

• We will advise on whether it is worthwhile to switch to the so-called Cash-based PIT in a given situation.
• We will answer the most common questions and doubts (what if the form of taxation is changed? Is it necessary to keep separate records of sales for entrepreneurs and individuals? When to recognise costs? How to verify contractors?).
• We will help you with all formalities related to the transition to the so-called cash-based PIT.