Fixed tax, or lump-sum tax (one-time income tax) – is a payment of a fixed amount. Regardless of the duration or intensity of economic activity and financial results. Its share in the entrepreneur’s expenses decreases as sales increase. Depending on the type of business activity, it is charged at a fixed tax rate.
Expenses and Lump-Sum Payment
A characteristic feature of the registered lump-sum tax is that business expenses do not affect the tax liability. In the case of the registered lump-sum system, the concept of deductible expenses does not exist at all. The legislator ties the amount of tax solely to the amount of revenue.
Taxation under the registered lump-sum income system is regulated by Chapter 2 of the Act of November 20, 1998, on the lump-sum income tax on certain revenues earned by individuals.
The fixed rate is linear and constant regardless of the amount of income received. Except for “private” rentals. Different types of rates are set for different types of activity. Their height is adjusted to the average profitability of the activity. Ie, in the commercial activity the flat rate is 3%. And in the case of free professions, the rate is set at 20% of revenue.
Undoubtedly, the flat rate is an incentive for taxpayers. They can keep their cost of income as low as possible and maximize their profitability. Only the revenue is affected by the amount of taxation. Hence, the lower your operating costs, the greater the actual income (profit) for the same amount of tax. It should also be noted that for some taxpayers, taxation in the form of lump-sum may not be beneficial. In particular, this will be the case for those taxpayers who bear high, often untypical, operating costs, such as start-up taxpayers and high costs of “launching” (investments, preparatory activities, etc.).
Ways of settling income tax
Individuals conducting business activity may settle income tax in several ways. Among them is a flat rate, which assumes taxation on all revenue, not less than the cost of obtaining it. This solution seems to be very attractive due to reduced tax rates for other taxation methods, but not everyone can decide for them. Not all taxpayers also have the same flat rate.
According to the Flat-rate Income Tax Act on certain incomes earned by natural persons (November 20, 1998), this form of settlement is intended for natural persons who earn income:
- from non-agricultural business activities,
- as well as from letting, subletting,
- leasing,
- other agreements of a similar nature.
Religious people (legally recognized denominations) can also use the lump sum.
The Flat rate booked of the income earned by individuals specifies the rates, ie:
20%, 17%, 8.5%, 5.5% and 3%.
Income tax can be paid using one of them, and if the activity is varied – with a few.
Taxpayers who have opted for a lump sum income tax return must, in writing, make a written statement. And then provide it to the head of the relevant tax office. It is important to do this before January 20 of the relevant tax year.
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