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Each entrepreneur must declare the method of settling income tax and VAT. Polish entrepreneurs can choose one of two forms of tax settlement - monthly or quarterly. The right for quarterly settlement of income tax (CIT) may be used by small taxpayers (whose value of sales revenue in the previous year did not exceed EUR 1,200,000) and taxpayers who are starting their business activity. The right for quarterly VAT tax settlement may also be used by small taxpayers if at least 12 months have passed from the date of VAT registration. In this article, we will talk about the benefits of quarterly tax payments.
The first advantage is that this form means fewer contacts with the tax office, because VAT and income tax are not paid twelve times, but four times a year. It is important to add that for many entrepreneurs, quarterly tax accounting also saves time. It is due to the fact that making settlements, transfers and submitting of declarations can be done less often.
Bigger financial liquidity is another advantage of paying taxes quarterly. It is especially important for some small companies. Taxes are paid once in three months. It gives more flexibility in planning of expenses. The entrepreneur can use money for his business. This money can be used for the company's needs or for investments.
When customers are late with payments of invoice, quarterly VAT system gives more time for paying. As a rule, VAT can be subtracted in the period when tax liability appeared or in two following periods. So, the time in which VAT can be subtracted from the invoice became longer.
In order to use the option of quarterly paying income tax basis, the entrepreneur is obliged to notify the head of the competent tax office about this choice. The transition to quarterly tax settlement, in the case of income tax, is possible only once a year, until February 20. If the entrepreneur uses advantage of the benefit of quarterly VAT settlement, he may change the settlement period by submitting to the tax office an updated VAT-R form.