Income tax is one of the most important elements of the tax system in Poland, covering both individuals and legal entities running a business. Every entrepreneur has to settle their tax liabilities regularly, but the way advance payments (zaliczki) are calculated differs significantly depending on whether we are dealing with PIT (personal income tax) or CIT (corporate income tax).
Understanding how PIT and CIT advances are calculated is key to managing company finances properly and avoiding problems with the tax authorities. Differences in calculation methods, tax rates and available deductions can significantly affect the amount of tax liabilities and the company's cash flow.
In this article we compare in detail how income tax advances are calculated, covering all the important aspects of the calculation, payment deadlines and practical tips on planning tax payments.
Basics of income tax in Poland
Income tax is a compulsory cash payment by an individual or a legal entity to the state, based on the taxpayer's income earned in a given settlement period. The amount of tax depends mainly on the chosen form of taxation and on any reliefs and deductions available to the taxpayer.
For both PIT and CIT, advances can be paid monthly or quarterly (quarterly – small taxpayers and taxpayers starting a business), while the return and the final settlement are made after the end of the tax year. This system spreads the tax burden over time and gives the state a regular flow of budget revenue.
Under Article 24a(1) of the PIT Act, individuals running a business must keep a KPiR (tax revenue and expense ledger) or accounting books in a way that makes it possible to determine income, the tax base and the amount of tax due for the tax year
The income tax advance system is designed to ensure continuous financing of the state budget while allowing taxpayers to spread the tax burden over the whole year. This helps entrepreneurs plan their cash flow better and avoid having to pay large sums at once at the end of the tax year.
Income tax is calculated on income, which is the difference between revenue and tax-deductible costs. Individuals can choose between different forms of taxation, whereas legal entities are subject to uniform rules laid down in the CIT Act.
Forms of personal income tax
Settling personal income tax on business activity allows you to choose a convenient form of taxation from several options. Each of these forms has its own rules for calculating tax, different rates and specific restrictions.
The first and basic form of taxation is the general rules, also known as the tax scale. This form is available to every entrepreneur without exception and uses a progressive tax scale. This means that the higher the income, the higher the tax rate – 12% for income up to PLN 120,000 a year and 32% on the excess above that amount, with a tax-reducing amount of PLN 3,600 (Article 27(1) of the PIT Act).
The second option is the flat 19% tax (podatek liniowy), which has a fixed rate of 19% regardless of income. This form of taxation is particularly beneficial for entrepreneurs with higher income, because it lets them avoid the higher progressive rate.
The flat-rate tax on recorded revenue (ryczałt) is a preferential form of taxation with lower tax rates, but in return you cannot deduct tax-deductible costs, and reliefs and deductions are available only to a limited extent (Article 11 of the Act on flat-rate income tax)
The third form is the flat-rate tax on recorded revenue, which offers preferential tax rates depending on the type of business. Ryczałt rates range from a few to over a dozen percent, but the taxpayer cannot deduct tax-deductible costs or use most tax reliefs.
The last form of taxation is the tax card (karta podatkowa), which applies only to certain types of business and has a fixed monthly tax amount regardless of revenue. Since 2022 it can no longer be chosen – it is used only by taxpayers who have continued it after 31 December 2021 (Article 25(1)(1) of the Act on flat-rate income tax).
In most cases the entrepreneur decides on the form of taxation, but before choosing they must consider the exclusions set out in the regulations. The first step is to check whether the type of business is listed in the relevant catalogue of exclusions for a given form of taxation.
Detailed calculation of the PIT advance
Calculating the PIT advance under the general rules requires a specific sequence of steps. The whole process uses the cumulative method from the beginning of the tax year, which means that each subsequent advance takes into account all revenue and costs incurred since January of that year.
The first step in calculating the advance is to determine income since the beginning of the year. To do this, subtract the total tax-deductible costs incurred from January to the end of the settlement period from the total revenue earned in the same period. The result is the gross income for further calculations.
From the income since the beginning of the year, subtract the total social security contributions paid to obtain the taxable income since the beginning of the year. This amount is the basis for further tax calculations
The next step is to reduce the income by the social security contributions paid to ZUS (Social Insurance Institution) during the year. These contributions cover pension, disability, sickness and accident insurance paid by the entrepreneur. After deducting them, you get the taxable income since the beginning of the year.
The taxable income since the beginning of the year must then be rounded to full złoty according to mathematical rules. The rounded amount is the tax base on which the tax due is calculated.
The calculation of the tax depends on the amount of the tax base. If the base does not exceed PLN 120,000, the 12% rate applies. If it exceeds this threshold, the tax is PLN 10,800 plus 32% of the excess above PLN 120,000.
- Determine income since the beginning of the year by subtracting costs from revenue
- Reduce income by social security contributions
- Round to full złoty – this gives the tax base
- Calculate the tax at the applicable rate
- Subtract the tax-reducing amount of PLN 3,600 (in the second bracket it is already included in the PLN 10,800)
- No deduction of the health insurance contribution (under the tax scale it does not reduce the tax)
- Subtract the advances already paid in the tax year
After calculating the tax on the tax base, subtract the tax-reducing amount from the result. Since 2022 this amount no longer decreases once you exceed the first tax threshold – in the second bracket it is built into the scale (PLN 10,800 is 12% of PLN 120,000 minus PLN 3,600).
The health insurance contribution is not subtracted from the calculated tax. Under the tax scale it is 9% of income and since 2022 it cannot be deducted either from the tax or from income (Article 27b of the PIT Act has been repealed).
The last step in calculating the advance is to subtract all advances already paid in the tax year from the tax payable calculated since the beginning of the year. The result is the advance for the given settlement period
The flat tax as an alternative in PIT
The flat tax is an alternative form of taxation for entrepreneurs, with a fixed tax rate regardless of income. This form of taxation is particularly attractive for people with higher income, because it lets them avoid the progressive tax scale.
The way the advance is calculated under the flat tax is similar to the method used under the general rules, but differs in several important respects. Above all, the fixed 19% rate applies regardless of income, which makes the calculation much simpler.
The first stage of calculating the advance under the flat tax is to determine income since the beginning of the year. As under the general rules, subtract the total tax-deductible costs incurred in the same period from the total revenue earned since the beginning of the year.
Next, subtract the total social security contributions paid from that income to get the taxable income since the beginning of the year. After rounding to full złoty, this amount is the tax base.
Under the flat tax, a fixed 19% rate applies to the entire tax base, regardless of its amount. There are no tax thresholds or tax-free amount, which makes the calculation much simpler
Calculating the flat tax is much simpler than under the general rules. You calculate 19% of the tax base without any tax thresholds or tax-free amount. The result is the tax since the beginning of the year.
Health insurance contributions are not subtracted from the tax. Under the flat tax they amount to 4.9% of income and – before calculating the 19% – can be deducted from income or included in costs, in 2026 up to the limit of PLN 14,100 (Article 30c(2)(2) of the PIT Act). The tax on the base is therefore the tax payable calculated since the beginning of the year.
The last step is to subtract all advances already paid in the tax year from the tax payable. The result, rounded to full złoty, is the advance for the given settlement period.
Corporate income tax – basic information
Corporate income tax covers a wide range of business entities, including legal persons established under the Commercial Companies Code, capital companies in organisation and organisational units without legal personality. The exception is partnerships without legal personality (e.g. civil and professional partnerships) and enterprises in probate, which are not subject to CIT – on the other hand, limited partnerships, limited joint-stock partnerships and, in certain cases, general partnerships are CIT taxpayers (Article 1(2)–(3) of the CIT Act).
All matters relating to corporate income tax are regulated in detail in the CIT Act. The Act sets out both the rules for calculating the tax and the procedures for settling and paying it.
CIT advances must be paid by the 20th day of the following month or quarter, depending on the settlement frequency. Only small taxpayers and taxpayers in their first year of business can pay them quarterly (Article 25(1b)–(1c) of the CIT Act), which lets smaller companies match the payment rhythm to their financial capacity.
For legal entities, the financial year is not always the same as the calendar year and may be longer or shorter. The annual return is filed on the CIT-8 form by the end of the third month of the year following the tax year – for a calendar year, by 31 March (Article 27(1) of the CIT Act)
An important feature of corporate income tax is the possibility of having a financial year different from the calendar year. This means that some companies may start their tax year in a month other than January, which affects the deadlines for filing returns and settling the tax.
The annual CIT return is filed on the CIT-8 form, and for taxpayers whose tax year is the calendar year the deadline is 31 March of the year following the year covered by the return.
CIT taxpayers are required to keep accounting books, i.e. full accounting. This requirement results from the need to track all business transactions accurately and their impact on the company's financial result.
CIT rates and calculation rules
The basic corporate income tax rates are set at two levels, depending on the taxpayer's status and the nature of its business (from 2026, separate target rates of 23%, 21% and 11% apply to banks and cooperative savings and credit unions – Article 19(1)(3)–(5) of the CIT Act; during the transitional period they are higher – 30%, 27% and 17% in a tax year beginning in 2026, Articles 38aa–38ac). The basic CIT rate is 19% and applies to most taxpayers subject to this tax.
For small taxpayers and companies in their first year of business there is a preferential rate of 9% on income other than capital gains. It applies if revenue in the tax year did not exceed EUR 2,000,000 – PLN 8,431,000 in 2026 (rate of PLN 4.2156 from the first working day of the year, 2 January 2026). It is not available, among others, to tax capital groups, family foundations and some entities created through transformations or from a contributed enterprise (Article 19(1)(2) and (1a)–(1e) of the CIT Act).
The CIT tax base is the income earned, which is the difference between revenue and tax-deductible costs. Taxable revenue includes cash received, monetary values, exchange rate differences and the value of goods, rights or other benefits received free of charge or partly free of charge.
The CIT tax base is the sum of income from capital gains and income from other sources of revenue. Taxpayers may make deductions from this base as provided for in the regulations
Revenue is often reduced by the costs of earning it, which gives the income that forms the basis for calculating the tax. Tax-deductible costs are expenses incurred to earn revenue or to maintain or secure a source of revenue, properly documented and not listed in the catalogue of exclusions (Article 15(1) and Article 16(1) of the CIT Act).
Taxpayers may make certain deductions from the tax base provided for in the CIT Act. These deductions are intended to support certain types of activity or to encourage socially or economically beneficial actions.
The most important deductions from the tax base include donations for purposes specified in the regulations up to certain income limits, losses from previous years up to a certain number of years, expenditure on research and development, and loans written off by banks in connection with restructuring up to certain limits.
| Type of deduction | Deduction limit | Settlement period | Conditions |
|---|---|---|---|
| Donations | Up to 10% of income | Tax year | Purposes set out in the regulations |
| Losses from previous years | Up to 5 years back | Following years | Documented losses |
| R&D work | Up to 200% of expenditure | Year incurred | Research activity |
| Loans written off (banks) | 20% of the loans written off | Year of write-off | Restructuring |
Simplified CIT advance payments
CIT taxpayers can pay CIT advances in a simplified form, which makes payment planning much easier and reduces the administrative burden of calculating advances in every settlement period.
The simplified form means paying monthly advances of 1/12 of the tax due shown in the return filed in the year preceding the given tax year. This method spreads the tax burden evenly over time and makes cash flow planning easier.
If the annual return filed in the preceding year showed no tax due, taxpayers can pay monthly advances of 1/12 of the tax due resulting from the return filed two years before the given tax year.
If the return filed two years before the given tax year also showed no tax due, CIT advances cannot be paid in the simplified form. The taxpayer must then calculate advances under the general rules
The simplified form of advance payments is particularly beneficial for companies with stable financial results that can forecast their tax burden on the basis of historical data. It allows better budget planning and avoids complex calculations every month.
However, remember that the simplified form does not exempt you from filing the annual return and making the final tax settlement. If the actual tax due for the year differs from the total advances paid, the difference must be paid or may be refunded to the taxpayer.
- Simplified advances are based on historical data from previous years
- The advance is 1/12 of the tax from the annual return
- The method is available only if tax was shown in previous years
- It makes cash flow planning easier for the business
- It does not exempt you from filing the annual return
- It requires a final settlement at the end of the tax year
Main differences between PIT and CIT advances
Comparing how PIT and CIT advances are calculated, we can identify several fundamental differences that result from the different nature of these taxes and the different goals they serve in the tax system.
The first important difference is the available forms of taxation. Individuals running a business can choose from several forms of taxation, such as the tax scale, the flat tax, the flat-rate tax on recorded revenue or the (continued only) tax card. Legal entities are subject to uniform rules laid down in the CIT Act.
The tax rates also differ. In PIT, the tax scale uses rates of 12% and 32%, the flat tax 19%, and ryczałt various rates depending on the type of business. CIT uses a rate of 19% or the preferential 9% for small taxpayers and in the first year of business.
Individuals taxed under the tax scale can use the tax-reducing amount and various reliefs and deductions, which significantly affect the amount of the advance. Legal entities have access to other types of deductions, mainly related to business activity
Another difference is the way records are kept. Individuals can keep the simplified KPiR (when net revenue for the previous year was below EUR 2,500,000), whereas legal entities must keep full accounting in line with the Accounting Act.
The differences also concern simplifications in calculating advances. The simplified form of advance payments based on historical data can be used both by legal entities (Article 25(6) of the CIT Act) and by individuals taxed under the tax scale or the flat tax (Article 44(6b) of the PIT Act) – in both taxes it is not available in the first and second year of business.
Advance payment deadlines are similar in both cases – by the 20th day of the month following the settlement period, and the advance for the last month or quarter of the year is paid by the 20th day of the first month of the following year. In both taxes only small taxpayers and taxpayers starting a business can settle quarterly.
A sp. z o.o. (limited liability company) running a trading business used the preferential 9% CIT rate for its first three years, paying monthly advances calculated on current financial results. After exceeding the limits for small taxpayers, the company switched to the standard 19% rate and decided to use the simplified form of advance payments based on the tax shown in the return filed in the previous year.
Practical aspects of calculating advances
Calculating income tax advances in practice requires a systematic approach and well-organised financial records. Whether you are dealing with PIT or CIT, it is key to keep current records of revenue and costs and to monitor tax liabilities regularly.
For individuals running a business, it is important to classify revenue and costs correctly under tax rules. Not all expenses incurred in connection with the business can be treated as tax-deductible costs, so you need to know the relevant regulations.
Legal entities must pay particular attention to keeping accounting books correctly and to the compliance of their accounting records with tax requirements. The differences between the accounting and the tax result can be significant and require appropriate adjustments when calculating the tax base.
Using available IT tools, such as accounting systems or tax calculators, can make calculating advances much easier and reduce the risk of errors. Automating calculations allows faster and more accurate determination of tax liabilities
Another important practical aspect is planning advance payments with the company's cash flow in mind. Paying advances regularly helps you avoid having to pay large amounts at once at the end of the year and potential late-payment interest.
Entrepreneurs should also remember that with advances calculated cumulatively, changes in income are automatically reflected in the following advances, whereas the simplified form must be applied for the whole tax year (Article 44(6c)(2) of the PIT Act, Article 25(7)(2) of the CIT Act). This helps match the advances paid to the actual tax liabilities.
Monitoring changes in tax regulations is also key to calculating advances correctly. Changes in tax rates, thresholds or deduction rules can significantly affect tax liabilities and must be reflected in the calculations.
