December is a month of particular challenges for every business owner who keeps a KPiR (tax revenue and expense ledger). Closing the tax year requires not only a systematic approach but, above all, knowledge of all the procedures and obligations that follow from the law. A well-prepared schedule of work lets you carry out the whole process efficiently and reliably while staying compliant with the tax rules in force.
Closing the year in the KPiR consists of several key stages, each of which is fundamental to determining the tax base correctly. Remember that every step should be carried out with due care and in line with the rules in force, because any mistakes can have serious financial and legal consequences.
Closing the year in the KPiR is a multi-stage process that requires a physical stocktake, a proper valuation of the items counted and the calculation of taxable income. All these steps must be carried out in line with the rules in force and within set deadlines
Pay particular attention to the fact that the obligation to prepare the year-end documentation applies to all taxpayers keeping a KPiR, whether their business is active or suspended. Business owners often overlook this, which can lead to errors in their tax settlements.
Physical stocktake: basic information and obligations
The physical stocktake (spis z natury), also called the closing stock count (remanent), is one of the most important elements of closing the tax year in the KPiR system. It is a document that reflects the actual state of the business's assets on a given day, making it possible to determine precisely the value of the items that remained unsold at the end of the tax year.
The obligation to prepare a physical stocktake follows directly from tax law and applies to all taxpayers keeping a tax revenue and expense ledger. Importantly, the obligation is not limited to business owners actively running their business — it also applies to those whose business is suspended but who hold goods or materials intended for sale.
The physical stocktake must be prepared as at 31 December of each tax year by all taxpayers keeping a KPiR. The obligation also applies to business owners whose business is suspended, if they hold trading goods or materials
When else a physical stocktake is required
The end of the year is the most common, but not the only, date for a stocktake. Since 1 January 2026 the regulation of the Minister of Finance and Economy of 6 September 2025 (Journal of Laws (Dz.U.) 2025, item 1299) has applied — under its § 20(1), taxpayers must prepare a stocktake and enter it in the ledger in strictly defined situations and on strictly defined dates.
A stocktake must be prepared as at 1 January of each tax year, at the end of each tax year and in special situations connected with running the business. The obligation also arises on the day the business starts during the tax year and when the taxpayer loses the right to the flat-rate tax on recorded revenue (ryczałt)
Special situations requiring a stocktake also include changes in the ownership structure of the business. This applies in particular to a change of partner in a partnership, a change in the partners' shares and the moment the business is liquidated.
The closing stock should cover all goods and materials that remained unsold or unused as at 31 December — both those bought during the year and recorded in column 12 of the tax revenue and expense ledger (from 2026; previously column 10) and those left over from previous years. This means you must physically check the goods and materials you hold and compare the result with your records.
The physical stocktake covers the following categories of items:
- Trading goods bought for resale
- Basic materials used in production
- Auxiliary materials needed to run the business
- Semi-finished products resulting from partial processing of materials
- Finished products manufactured by the business
- Rejects arising in production
- Waste with economic value
A special category is third-party goods, i.e. items owned by other entities but held by the business owner on the day of the stocktake. These goods are included in the stocktake by quantity, but they are not valued — it is enough to state their quantity and type, together with who owns them (§ 21(3) of the KPiR regulation).
The physical stocktake must also include goods owned by the business owner that are outside their premises on the day of the stocktake. These may be goods handed over for sale on commission or goods in transit
An important aspect of the physical stocktake is that fixed assets and equipment are excluded from it. Although these items are part of the business's assets, they are subject to separate depreciation rules and are not taken into account when determining tax-deductible costs through the closing stock mechanism.
The stocktake procedure requires particular care and a systematic approach. You should plan the count so that the actual quantity of every item covered by the stocktake can be established accurately. If your business operates on a larger scale, it is advisable to prepare a detailed stocktake schedule.
Formal requirements for the physical stocktake
The implementing provisions of the PIT Act set out in detail the formal requirements that a physical stocktake prepared by KPiR taxpayers must meet. Meeting these requirements is key for the document to be treated as properly prepared and usable in tax settlements. From 1 January 2026 these are § 20–22 of the Regulation of the Minister of Finance and Economy of 6 September 2025 on keeping the tax revenue and expense ledger (Journal of Laws (Dz.U.) 2025, item 1299). We reflect the stocktake result in the KPiR and the annual return for clients of our accounting services.
The physical stocktake must be prepared carefully and durably, which means using materials that keep the entries permanent and all the information legible. The document should be prepared in a way that prevents later unauthorised changes or modifications.
The physical stocktake must include the owner's full name or the business name, the date of preparation and consecutive item numbers on the sheet. Each item requires a detailed description of the goods, the unit of measure and the quantity found during the count
A detailed description of the goods and other items covered by the stocktake is one of the key elements of the document. The description should be precise enough to identify each item unambiguously. For trading goods, it is advisable to give the trade name, type, kind and other features that distinguish individual product lines.
The unit of measure used in the stocktake should match the nature of the item. It may be a unit of weight (kilograms, tonnes), volume (litres, cubic metres), length (metres, kilometres) or pieces, depending on the items counted. It is important to use units of measure consistently for similar categories of goods.
The following elements must be included in the physical stocktake:
- The owner's full name or the business name
- The date of the stocktake
- The consecutive item number on the stocktake sheet
- A detailed description of the goods and items covered
- The unit of measure used for each item
- The quantity of each item found during the count
- The unit price in złoty and grosz
- The value resulting from multiplying the quantity by the unit price
- The total value of the whole stocktake
- The clause „Spis zakończono na pozycji ...” ("Stocktake ended at item ...") and the signature of the owner (partners)
The rules do not require a stocktake committee or a minimum number of people — § 21(2) of the KPiR regulation requires the signature of the owner (partners). In a sole proprietorship, an employee, a family member or the business owner's spouse can help with the count, which makes it easier to count reliably
Signatures on the physical stocktake confirm that the count was carried out correctly. The signature of the owner or partners, who are responsible for the correctness of the document, is mandatory. If other people also took part in the count, it is good practice for them to sign it as well, confirming that the information in the document matches the actual state. Similar requirements apply to counting the company's assets – we cover them under fixed asset stocktaking.
The clause confirming that the stocktake ended at a given item is meant to protect the document against additional items being added after the count has finished. It should state unambiguously at which item the stocktake ended.
Physical stocktake procedures
Preparing a physical stocktake requires following certain procedures and deadlines, which are key to the correctness of the whole year-end closing. Knowing these procedures helps business owners avoid mistakes that could have negative consequences in their tax settlements.
An important point is that there is no obligation to notify the head of the tax office (urząd skarbowy) about the year-end physical stocktake. This means you can carry out the count without informing the tax authorities in advance about its planned date or scope. The regulation in force since 2026 does not require notifying the tax office of an opening stocktake either, nor of a stocktake prepared during the year, for example on a change of partner.
The physical stocktake is not attached to the annual tax return and is not sent to the tax office. Keep it with your other accounting documents for 5 years from the end of the calendar year in which the tax payment deadline passed
The physical stocktake is kept under the same rules as other accounting documents. The retention period is 5 years from the end of the calendar year in which the deadline for paying income tax for the given tax year passed. The document must be kept in a way that ensures it remains legible and intact throughout the required period.
Pay particular attention to the physical stocktake for the beginning of the tax year. The rules provide that taxpayers who prepared a physical stocktake at the end of the previous tax year do not have to prepare a separate one as at 1 January of the following year. In that case, the stocktake prepared as at 31 December of the previous year is entered in the ledger.
This rule is meant to simplify business owners' administrative obligations and ensure continuity of stock records between tax years. The value of the stocktake from the end of the previous year is also the opening value for the new tax year (§ 20(2) of the regulation).
The situation is different for taxpayers who start their business on 1 January. As they did not prepare a stocktake at the end of the previous year, they must prepare an opening stocktake as at the day the business starts.
Practical example: A business owner running a building materials shop prepared a physical stocktake as at 31 December 2025, which showed goods worth PLN 45,000. The same value was entered in the ledger as the first item of 2026, without having to carry out another physical count as at 1 January 2026.
Entering the physical stocktake in the tax revenue and expense ledger requires particular attention to where and how it is recorded. The regulation requires the value of the stocktake to be entered in the ledger (§ 22(6)); in practice, the year-end stocktake is entered as the last item in the ledger, after the totals of all columns for the year. The same stocktake, as the opening value, is entered as the first item in the ledger for the following tax year.
You can choose how to record the physical stocktake. You can enter it by type of item, which gives more detailed records, or as a single total. In both cases the details (items, quantities, prices) come from the stocktake sheets, which are worth keeping together with the ledger.
Valuation rules for the physical stocktake
Once the physical count is finished and the quantity of every item has been established, you must value them. This is a key stage that directly affects the amount of tax-deductible costs and the final amount of taxable income. The valuation must be made no later than 14 days after the end of the physical stocktake (§ 22(7) of the KPiR regulation).
The tax rules set out in detail how each category of item covered by the stocktake is valued. Using the correct valuation methods is mandatory and directly affects whether the tax settlement is correct. Valuation errors can lead to an incorrect tax base.
Materials and trading goods are valued at purchase price or acquisition price, but if the market prices on the day of the stocktake are lower than the purchase prices, the lower market prices must be used. This rule ensures a prudent approach to valuation
The valuation of materials and trading goods is based on the lower of two values: the purchase or acquisition price, or the market price on the day of the stocktake. This method, known as the prudence principle, is meant to prevent overstating the value of stock when the market value of items has fallen below the original acquisition price.
Semi-finished products, finished products and rejects from your own production are valued at production cost. Production cost covers all outlays directly related to production, including the cost of direct materials, direct labour and a reasonable share of indirect production costs.
Special valuation rules apply to the following categories:
- Waste that has lost its original usefulness — valued at an estimated value that takes into account its usefulness for further use
- Work in progress in service and construction activity — valued at production cost, not lower than the cost of direct materials
- Livestock — valued at market prices, taking into account the species, group and weight of the animals
Business owners who are active VAT payers value goods for which they were entitled to deduct VAT at net prices. In other cases the valuation is made at gross value
Whether net or gross prices are used in the physical stocktake depends on your VAT status. Active VAT payers who were entitled to deduct input VAT on the purchase of goods value them at net prices. This means VAT is not included in the valuation, because it has already been deducted as input tax.
Business owners who are not active VAT payers, or who were not entitled to deduct VAT, should value goods at gross value, i.e. including VAT. This is because for such business owners VAT is part of the cost of acquiring the goods.
The valuation process requires detailed documentation, which should include information on the valuation methods used, the sources of market price information and the production cost calculations. This documentation may be examined by the tax authorities, so it must be kept with due care.
Recording the physical stocktake in the tax revenue and expense ledger
Correctly recording the value of the physical stocktake in the tax revenue and expense ledger is the final stage of the stocktaking process and directly affects the calculation of the business owner's income. The KPiR regulation requires the value of the stocktake to be entered in the ledger (§ 20(1) and § 22(6)), and the explanatory notes to the ledger set out how it is used to calculate income.
In practice, the physical stocktake prepared at the end of the tax year is entered as the last item in the tax revenue and expense ledger, after the totals of all columns for the year have been made. This placement makes it easier to determine tax-deductible costs and the tax base correctly.
The value of the physical stocktake can be entered in the ledger by type of item or as a single total. In both cases the entry is based on the stocktake sheets listing the individual items
You can choose how to present the physical stocktake in your records. The first option is to show the individual categories of items separately, such as trading goods, basic materials, auxiliary materials, semi-finished products or finished products. This gives more transparency and makes it easier to analyse the structure of your stock.
Alternatively, you can record the whole value of the physical stocktake as one entry, as the total of all items. In that case the details come from the stocktake sheets, which are worth keeping together with the tax revenue and expense ledger. A summary broken down by category of item, with their values, is also helpful.
A special situation arises when the business has no trading goods or materials covered by the stocktake obligation. In that case the closing stock value is PLN 0, but it must still be entered in the ledger. This entry is formal and confirms that the physical stocktake obligation has been met.
Practical example of recording: A business owner running a manufacturing business prepared a physical stocktake showing basic materials worth PLN 15,000, auxiliary materials worth PLN 3,500 and finished products worth PLN 8,200. They can enter these items separately as three entries in the ledger or as one entry worth PLN 26,700, with a detailed summary attached.
Another important aspect is recording the physical stocktake as the first item in the ledger for the following tax year. The value of the closing stock prepared as at 31 December automatically becomes the opening value of stock as at 1 January of the following year. This mechanism ensures continuity of records and the correct calculation of tax-deductible costs in the next tax year.
The order of entries matters. First total all business transactions for the year, and only then enter the closing stock value. This keeps the sequence of entries correct and makes it easier to check that the entries are right.
Calculating taxable income
Calculating taxable income is the culmination of closing the year in the KPiR system and requires precise use of the formula set out in the tax rules. Calculating income correctly directly affects the amount of tax due and the correctness of the annual tax return filed with the tax office.
Calculating income consists of three main stages, each of which requires detailed analysis and precise calculations. The first stage is to determine the revenue earned, which comes from column 11 of the tax revenue and expense ledger (from 2026, the total of column 9 — sales of goods and services — and column 10 — other revenue). Revenue is, as a rule, the amounts due, even if they have not yet actually been received (Article 14(1) of the PIT Act), and also includes, among other things, the value of benefits received in kind.
Calculating income in the KPiR requires three steps: determining revenue from column 11, calculating tax-deductible costs taking the closing stock into account, and deducting costs from revenue (Article 24(2) of the PIT Act, point 22 of the explanatory notes to the ledger). The result is the tax base
The second and most complicated stage is determining the tax-deductible costs incurred. This requires taking into account the values of the physical stocktakes at the beginning and end of the tax year and all purchases made during the year. The formula includes the following elements:
To the value of the physical stocktake at the beginning of the tax year, add the values from column 12 (purchases of trading goods and materials at purchase prices) and column 13 (incidental purchase costs, e.g. transport, loading). Then deduct the value of the physical stocktake at the end of the tax year from this total.
To the result of this calculation, add the value from column 16 of the ledger (total expenses: wages from column 14 and other expenses from column 15), which covers business costs not included in columns 12 and 13. At the same time, reduce the total by the value of wages in kind, but only to the extent that they were recorded in other columns of the ledger.
| Calculation stage | Operation | KPiR column | Notes |
|---|---|---|---|
| 1. Revenue | Total revenue for the year | Column 11 | Sales (9) and other revenue (10) |
| 2a. Basic costs | Opening stock + purchases + incidental costs - closing stock | Columns 12, 13 | Closing stock taken into account |
| 2b. Additional costs | Total expenses minus wages in kind recorded in other columns | Column 16 | Adjustment for wages |
| 3. Income | Revenue minus total costs | - | Tax base |
The third and final stage is to deduct the total tax-deductible costs, calculated as described above, from the revenue determined (column 11). The difference is the income earned in the tax year, which is carried over to the relevant annual tax return.
Taking physical stocktakes into account when calculating costs ensures that only purchases actually used in the business in a given tax year become tax-deductible costs
Pay particular attention to the economic logic of the formula. Adding the value of the opening stocktake means that goods bought in previous years but sold in the current year become a cost of the current year. Deducting the value of the closing stocktake means that goods bought in the current year but not sold are not a cost of the current year.
Calculating income requires particular care for businesses that operate seasonally or whose stock levels fluctuate significantly. In such cases the differences between stocktakes can be substantial and have a significant effect on the taxable income calculated.
Practical aspects of closing the year
Closing the tax year in the KPiR system requires not only knowledge of the rules but also practical experience in applying them. Business owners often face difficulties arising from the variety of business situations and the nature of their business, which calls for a flexible approach while staying compliant with the rules in force.
One of the key practical aspects is planning the schedule of year-end work properly. This process cannot be left until the last minute, because it takes time to carry out an accurate count, make the valuation and prepare all the necessary documents. Experienced business owners start preparing as early as November, which lets them complete all procedures without stress. The annual tax return (PIT-36 under the tax scale, PIT-36L under the flat 19% tax (podatek liniowy)) is filed between 15 February and 30 April of the following year (Article 45(1) and (1a) of the PIT Act).
The year-end schedule should allow time for the physical stocktake, the valuation within 14 days, calculating income and preparing the annual tax return. Starting the procedures earlier gives more accuracy and peace of mind
Pay particular attention to situations where the business operates in several locations or holds goods in different places. In such cases the physical stocktake must cover all locations, which requires coordinating the work and ensuring that the right people are present at each place where the count takes place. The most common slips in such counts are collected in our article on mistakes in stocktaking inventories.
Situations where goods are in transit on 31 December or have been handed over for sale on commission can also be problematic. The rules require such goods to be included in the physical stocktake, provided they are owned by the business owner. This requires proper documentation of the quantity and value of such goods.
Practical challenges of closing the year:
- Coordinating the count in different locations
- Establishing the quantity of goods in transit
- Valuing goods with volatile market prices
- Documenting goods handed over for sale on commission
- Settling goods returned by customers
- Accounting for damage and natural losses
Valuing items in the physical stocktake can be difficult for goods with highly volatile market prices. You must have reliable sources of market price information as at 31 December, which may require valuations from experts or the use of published price indices.
Example of a problematic situation: A business owner running a building materials wholesale business holds goods bought at different prices during the year. As at 31 December, the prices of some materials fell by 20% compared with the purchase prices. Under the rules, they must use the lower market prices, which requires establishing current prices accurately for each category of goods; for such items the stocktake must also show the unit purchase price (§ 22(8) of the KPiR regulation).
Another important practical aspect is organising the year-end documentation properly. All documents, including the physical stocktake, detailed summaries, documents confirming market prices and production cost calculations, must be kept in order and retained for 5 years from the end of the year in which the tax payment deadline passed (Article 86 § 1 and Article 70 § 1 of the Tax Ordinance Act (Ordynacja podatkowa)). Good organisation of documents makes any inspections and the preparation of settlements in later years easier.
Business owners running manufacturing businesses face additional challenges related to valuing work in progress and calculating production costs. This requires detailed records of production costs and the ability to allocate indirect costs to individual products or orders.
Pay particular attention to goods with a limited shelf life, items requiring special storage conditions and products with a high unit value. These categories of goods may require additional verification procedures or special valuation methods.
Goods purchased before starting the business: opening stocktake
In business practice, goods for resale are often bought before the business officially starts. People planning to launch a business often build up stock, which they later want to include in their tax records.
As a rule, such goods are not booked directly as business costs. The correct way to include them in the tax revenue and expense ledger is to prepare an opening stocktake as at the day the business starts.
- Prepare an opening stocktake as at the day the business starts
- Include all goods purchased earlier in the stocktake
- Value the items at the net or gross purchase price
- Compare with the market value on the day of the stocktake
- Choose the lower of the two values as the basis of valuation
Items included in the opening stocktake should be valued at the net purchase price if you have the right to deduct VAT, or at the gross price if you do not. Alternatively, you can use the value on the day of the stocktake if it is lower than the purchase price
This procedure lets you bring goods purchased earlier into your tax records correctly and keeps you compliant with the rules on keeping the tax revenue and expense ledger.
Exemptions from the year-end stocktaking obligation
The legislator has provided exemptions from the stocktaking obligation for certain groups of taxpayers. These exemptions are meant to simplify administrative obligations and reduce red tape for businesses using certain forms of taxation.
Since 1 January 2019, taxpayers paying the flat-rate tax on recorded revenue have been exempt from preparing a stocktake at the end of the tax year. The exemption was introduced by the Act of 9 November 2018 amending certain acts to introduce simplifications for entrepreneurs in tax and business law (Dz.U. 2018, item 2244), which repealed Article 15 section 3a of the Flat-Rate Income Tax Act
This exemption matters in practice for a large group of small businesses that have chosen the flat-rate tax. It removes a time-consuming and costly stocktaking process and simplifies the procedures for closing the tax year.
Remember, however, that the exemption applies only to flat-rate taxpayers and does not cover businesses keeping the tax revenue and expense ledger (tax scale, flat tax (podatek liniowy)) or accounting books. A business owner who loses the right to the flat-rate tax during the year prepares a stocktake as at that day (§ 20(1)). These taxpayers still have to carry out regular stocktakes in line with the rules in force — entities keeping accounting books carry them out under Articles 26–27 of the Accounting Act.
Consequences of year-end stocktaking errors
An incorrect stocktake can have a range of negative tax and legal consequences. Business owners should be aware of the potential risks associated with errors in the stocktake.
Stocktaking errors can lead to an incorrect tax base, which in turn may result in the tax office assessing tax arrears. The tax authorities may challenge the correctness of the stocktake and require additional explanations or corrections.
Incorrect valuation of the items covered by the stocktake can lead to understated or overstated taxable income. The consequences may include additional tax liabilities, default interest and, where the ledger is kept unreliably, also a fine under Article 61 of the Fiscal Penal Code
Documentation errors in the stocktake can also make it harder to run the business and plan finances. Incorrect data on the state of assets can lead to wrong business decisions and problems with stock management.
Business owners should pay particular attention to whether the stocktake results match the records kept during the tax year. Significant discrepancies may point to problems with internal control or errors in record-keeping.
