Changing the definition of a free profession and tax card

Date 1 January 2021 the definition of the free profession has been amended in the flat-rate scheme. It would appear that this modification would not give rise to much stir as the new professions considered to be free continue to benefit from a high flat rate, so that the choice of this form of taxation was only relevant to those taxpayers who actually do not bear any costs or bear low income costs, i.e. the choice of taxation on a general basis (i.e. a tax scale) or a linear tax is not more optimal for them.

1. New definition of free trade

According to the revised flat-rate scheme, non-agricultural economic activity in the professions indicated below is considered to be a free profession in the table below 1, where personal pursuit of a free profession is considered to be the pursuit of activities without employment on the basis of employment contracts, contract orders, contract works and other contracts of a similar nature by persons who perform activities related to the essence of the profession.

on 1 January 2021 it is no longer a problem for taxable persons exercising a free profession to provide services to legal persons and organisational units without legal personality or to natural persons for the purposes of their non-agricultural business activity, as it disappeared from the Flat.

In Table 1 presented how a group of professions that may be considered as free professions changed from the previous year.

Table 1. Comparison of free professions before and after the change

2. Individuals taxed on the basis of a tax card

As indicated by the legislator under Article 23 A flat-rate, flat-rate income tax in the form of a tax card may be paid by taxable persons operating:

• 1) service or manufacturing-service,
• 2) services in the field of retail trade in food, beverages, tobacco products and flowers, except beverages with an alcohol content above 1.5%,
• 3) retail services of non-food items, except motor fuels, means of transport, parts and accessories for motor vehicles, agricultural tractors and motorcycles, and trade in non-food articles licensed,
• 4) catering – if no sale of beverages with an alcohol content above 1.5%,
• 5) for transport services by use one vehicle, e.g. taxi service,
• 6) for entertainment services,

1. as regards the sale of domestic meals in dwellings, where there is no sale of beverages with an alcohol content above 1.5% inter alia, the sale of single-course meals and non-alcoholic beverages on the basis of a contract concluded with the competent unit for catering or tourism activities,
2. in free professions, involving the provision of human health services by a doctor, a dentist, dental technician, nurse, midwife or felcher,
3. in free trades, involving the provision of veterinary services by veterinary surgeons, including the sale of veterinary preparations,
4. in the field of home care for children and sick persons without hiring anyone except the spouse,
5. in the field of education services, which consists in providing lessons per hour.
6. Meaning of changing the definition of a free profession

Revision of the definition of a free profession – i.e. the deletion of the provisions on the non-professional activities for legal persons and non-legal entities or for natural persons for the purposes of their non-agricultural business, has made it possible for many doctors, who, for example, worked for hospitals, to benefit from the tax card.

4. Obligations of ‘kartowiczs’ in the event of changes in their activities

Tax payers taxed in the form of a tax card shall notify the head of the tax office:

1. the changes made to the facts given in the application for tax in the form of a tax card which:

(a) result in the loss of tax conditions in the form of a tax card,

(b) affect the amount of income tax in the form of a tax card and, in particular, changes in: the state of employment, the place of business, the type and extent of activity carried out, the number of parking lots and the number and type of facilities for the provision of entertainment services, the number of hours for the pursuit of a free profession for the protection of human health and the free profession for veterinary services, the number of household meals sold, the number of hours of home care for children and sick persons, the number of hours for the provision of lessons;

1. the liquidation of the business.

The flat-rate legislature also imposes an obligation on taxpayers to provide for circumstances allowing a change in the rate of tax.

Namely, where the taxable person carries out the activities listed under Article 23(1)(2-5)(8-11) and under Article 23(1a) Flat-rate in sizes indicating that specified in parts II–V and VIII–XII the rates would, of course, be inappropriate – these rates may, at the request of the taxpayer or of their own motion, be reduced or increased, but not more than by 50%.

The taxable person shall submit to the head of the tax office information on changes in the application for application for application of the tax card or liquidation of the activity, according to the established formula, at the latest within the time limit 7 the days following the occurrence of the circumstances causing the change.

Therefore, it may seem problematic to inform about changes in the profession of doctor, where the number of working hours may change every month. The question of how to count the term 7 the date of notification of the change and what change is significant enough to consider that it should inform about its operation in the size indicating that the monthly income tax rates in the form of a tax card, as defined in Annex No. 3, Part VIII of the Lump-Sum Tax Act (shown below in Table 2), would clearly be inappropriate.

Table 2. Tax card rates for the provision of human health services

Additional explanations to the table:

• 1. The rate also applies to professional employment one expert or trained assistance.
• 2. The rate does not apply to activities carried out in the form of a civil partnership of natural persons.
• 5. Conditions for using tax card

The conditions under which the taxable person may use the tax card are indicated. Under Article 25 Flat. These include:

• 1) filing an application for the choice of tax card on the form PIT-16 with an indication of what kind of economic activity the taxable person carries out in this form,
• 2) the conduct by the taxable person of a particular activity included In one of twelve Part of the table No 3 to the lump sum),
• 3) the lack of the possibility to use services of non-employed persons on the basis of an employment contract and services of other companies and establishments, unless specific services are involved;
• 4) inability to conduct other non-agricultural business activities other than those mentioned under Article 23 THE lump sum,
• 5) the taxpayer’s spouse must not pursue an activity to the same extent that income (income) is subject to separate income tax on general terms or a lump sum on recorded revenue,
• 6) the taxable person does not produce taxed products on the basis of separate provisions,
• 7) obligation to conduct business in the territory of Poland.
• 6. Tax Charter Decision

The head of the tax office, having regard to the application for a tax card, shall issue a decision setting the amount of income tax in the form of a tax card, separately for each tax year (Article 30 Flat-rate). If the activity is carried out in the form of a company, that decision shall list all its shareholders. If, on the other hand, the head of the tax office finds that there are no conditions for the application of taxation in the form of a tax card, it shall issue a negative decision.

In such a situation, the taxpayer will be required to settle the tax in the form of:

• 1) a lump sum on recorded revenue if it meets the conditions laid down in Chapter 2 A lump sum, or
• 2) personal income tax.
• 7. Summary

The inclusion of a tax card also for free professionals, e.g. doctors providing their services to hospitals, should be considered a positive change for taxpayers as it allows for a significant reduction of the tax liability.

However, taxpayers should take care to choose this form of taxation, given the number of information obligations it entails.

In particular, they should point out that there are no clear indications of how, for example, to count the period 7 days to inform the head of the tax office of a significant event affecting the income tax rate in the form of a tax card.

Should taxpayers count 7 days from the date of receipt of the information that the change occurs, or from the moment when the settlement occurs, e.g. the number of hours worked, at the end of the period?

Tax payers often ask for an individual interpretation in such a situation, but, despite the amendments, they still leave a high risk to taxpayers.

Legal basis

Article 23, Article 25, Article 29(1), Article 30, Annex No 2 to the Flat.

The article comes from the book C.H. Beck Publishing House Changes in Taxes and Accounting 2021 including anti-crisis shields (series: Law in practice, year: 2021) + CD, under the editor-in-chief of Professor Artur Hołday - Ksiegarnia.beck.pl.