PIT, CIT, VAT, Revenue, Income: A Complete Guide for Business Owners
Just starting a business, or running one for years but still not sure what separates revenue from income, who pays PIT and who pays CIT, and when it's worth registering for VAT? This article answers the questions you're afraid to ask your accountant. No jargon, with concrete numbers.
Table of contents
- Revenue vs. income: the basic difference
- PIT: personal income tax
- PIT tax methods: the tax scale, flat tax, lump-sum tax
- CIT: corporate income tax
- VAT: value-added tax
- VAT-registered or exempt? When each one pays off
- ZUS: contributions, and how to reduce your burden
- Comparison: sole proprietorship vs. limited liability company
1. Revenue vs. income: the basic difference
These are the most commonly confused terms in business finance. The difference is fundamental:
Revenue
All the money coming into the business from its operations.
Example: you issued invoices totaling PLN 200,000 over the year. That's your revenue.
Income
Revenue minus tax-deductible costs.
Example: PLN 200,000 in revenue minus PLN 130,000 in costs = PLN 70,000 in income. You pay tax on PLN 70,000.
A tax loss is a situation where costs exceed revenue and income is negative. You can carry it forward and offset it over the next 5 tax years (up to 50% of the loss per year).
Important: what counts as a cost?
A tax-deductible cost must be incurred in order to generate revenue, and properly documented (an invoice, a receipt, a contract). Not every expense counts as a tax cost: contractual penalties you're at fault for, or entertainment expenses, for example, are excluded.
2. PIT: personal income tax
PIT is paid by individuals: both employees (through their employer) and business owners running their own business.
Who specifically pays PIT from business activity:
- Sole proprietorship (JDG)
- Civil partnership (each partner separately, in proportion to their share)
- General partnership (similar to a civil partnership)
- Professional partnership
Limited liability companies, joint-stock companies, and other legal entities pay CIT instead. More on that shortly.
3. PIT tax methods: which one should you choose?
You have three main options. You make the choice once a year (by the 20th day of the month following the month in which you earned your first revenue).
| Method | Rate | Base | Costs | When it pays off |
|---|---|---|---|---|
| Tax scale | 12% (up to PLN 120k) 32% (above) |
Income | Yes | Low income, tax credits (e.g. the family credit), joint filing with a spouse |
| Flat tax | 19% (flat rate) | Income | Yes | Income above PLN 120,000 a year, no entitlement to the family credit |
| Lump-sum tax | 2%–17% (depends on business activity code) | Revenue | No | High margin, low costs, IT (12% rate), rental income (8.5%) |
Lump-sum tax: who is it for?
You pay the lump-sum tax on revenue, so you can't deduct any costs. It pays off when:
- You have high margins and low costs (e.g. developers, consultants, freelancers)
- The lump-sum rate is lower than your effective rate under the scale or flat tax
- You have no costs to deduct (remote work with no office, no employees)
Example: a developer with PLN 300,000 in revenue and PLN 20,000 in costs:
- 12% lump-sum tax: tax = 300,000 × 12% = PLN 36,000
- 19% flat tax: tax = (300,000 − 20,000) × 19% = PLN 53,200
- Savings on the lump-sum tax: PLN 17,200 a year
Note: ZUS under the lump-sum tax
Under the lump-sum tax, the ZUS health insurance contribution depends on revenue (not income). Above PLN 300,000 a year in revenue, it's 5% of revenue, which can wipe out your tax savings. Always calculate the combined burden: tax plus ZUS.
4. CIT: corporate income tax
CIT is paid by legal entities: mainly limited liability companies and joint-stock companies. There are two rates:
9%
Small taxpayer CIT
Revenue up to EUR 2 million a year. Condition: small-taxpayer status
19%
Standard CIT
Revenue above EUR 2 million, or no small-taxpayer status
Estonian CIT: you don't pay tax until you pay out profit
Estonian CIT (a lump-sum tax on companies' income) has been available in Poland since 2021. The principle is simple: the company doesn't pay CIT on an ongoing basis. Tax only appears once profit is paid out to shareholders (as a dividend, above-market compensation, and so on).
The effective rate when a dividend is paid out is around 20% (small taxpayer) or 25% (larger companies), similar to standard CIT plus dividend tax. But for as long as the company keeps reinvesting, it pays nothing. That's a powerful lever for businesses that reinvest their profits.
Entry conditions: no shares in other companies, passive income (interest, licensing fees) under 50% of the total, and at least 3 employees.
5. VAT: value-added tax
VAT is, in theory, a tax paid by the end consumer. The business is only a "middleman": it collects VAT from customers, deducts what it paid to suppliers, and remits the difference to the tax office.
The mechanism in 3 steps:
- You buy materials for PLN 10,000 net + PLN 2,300 VAT = PLN 12,300 gross
- You sell a product for PLN 20,000 net + PLN 4,600 VAT = PLN 24,600 gross
- You remit to the tax office: 4,600 − 2,300 = PLN 2,300 VAT
VAT rates
| Rate | What it covers |
|---|---|
| 23% | The standard rate: most goods and services |
| 8% | Construction services (social housing), restaurants, some medicines, importing artworks |
| 5% | Unprocessed food, books, e-books, most medicines |
| 0% | Exporting goods, intra-community supply of goods (WDT) |
| exempt | Financial, educational and medical services, residential rentals for housing purposes |
VAT filings and deadlines
- JPK_V7M: monthly filing (due by the 25th of the month, for the previous month)
- JPK_V7K: quarterly filing (due by the 25th after the quarter ends; small taxpayers can choose the cash method)
- Cash method: you pay output VAT only once you've actually been paid by the customer (not when you issue the invoice). Useful with long payment terms.
6. VAT-registered or exempt: when does each one pay off?
If your turnover doesn't exceed PLN 200,000 a year, you can use the subjective VAT exemption. But should you?
VAT exemption ✓ when:
- Your customers are individuals (B2C)
- You sell VAT-exempt services
- You have few purchases to deduct
- You want a lower price for the consumer
- Turnover below PLN 200,000
Being VAT-registered ✓ when:
- Your customers are businesses (B2B): they deduct VAT
- You have large VAT-bearing purchases (equipment, a car, materials)
- You import or export
- You want to deduct VAT on a company car
- You're planning fast growth
Example where exemption pays off: a hairdresser, services for consumers, no major purchases. A haircut priced at PLN 100: as a non-VAT-registered business, you charge PLN 100. As a VAT-registered business, you'd have to charge PLN 123, or earn less. The customer can't deduct VAT, so your price is effectively higher.
Example where being VAT-registered pays off: an IT business, with companies as clients. An invoice for PLN 10,000 net. The client deducts the VAT, so the price to them is still PLN 10,000. And you deduct the VAT on a PLN 6,000 laptop, a PLN 1,380 refund.
7. ZUS: contributions, and how to reduce your burden
ZUS is a separate topic, but a crucial one for whether running a business pays off.
For a sole proprietorship in 2026:
- Start-up relief, first 6 months: you pay only health insurance (around PLN 314/month)
- Small ZUS, the next 24 months: contributions based on 30% of the minimum wage (around PLN 800–900/month)
- Full ZUS, after 2.5 years: contributions based on 60% of the projected average wage (around PLN 1,700–1,900/month)
- Small ZUS Plus, for businesses with revenue up to PLN 120,000: contributions proportional to income, instead of full ZUS
Health insurance contribution: a change starting 2026
As of 2026, the health insurance contribution for a sole proprietorship is 9% of income (on the scale or flat tax) or a fixed lump-sum amount under the lump-sum tax. It isn't tax-deductible: it's a real additional burden. At PLN 100,000 in income, that's PLN 9,000 a year on health insurance alone.
8. Sole proprietorship vs. limited liability company: comparing the burden
Everyone earning above PLN 150,000–200,000 a year asks this question. There's no single answer: it depends on how much you pay yourself, how much you reinvest, and what your costs look like.
Example: PLN 300,000 in annual income, paying out the full amount
| Burden | Sole proprietorship (19% flat tax) | Limited liability company (9% CIT + dividend) |
|---|---|---|
| Income tax | PLN 57,000 (19%) | PLN 27,000 (9% CIT) |
| ZUS (social contributions) | ~PLN 22,000 | ~PLN 22,000 (as a company employee) |
| Health insurance | ~PLN 27,000 (9% of income) | ~PLN 4,000 (lump-sum) |
| Dividend tax | — | ~PLN 51,870 (19% of PLN 273,000 after CIT) |
| Total | ~PLN 106,000 | ~PLN 104,870 |
The difference is around PLN 1,100 in favor of the company at full dividend payout. However, the company has higher running costs (accounting from PLN 1,500/month, KRS, reporting obligations), an extra PLN 10,000–18,000 a year. At PLN 300,000 in income, the outcome is essentially a tie.
The company starts to clearly win once you reinvest your profits. In that case, you don't pay dividend tax, and your effective tax rate drops to 9%.
Quick summary: what should you choose?
- Income below PLN 120,000 → the tax scale (12%, PLN 30,000 tax-free amount)
- Income PLN 120,000–250,000 → 19% flat tax or the lump-sum tax (depends on your costs)
- Income above PLN 250,000, paying out the full amount → a limited liability company starts to make sense
- Income above PLN 250,000, reinvesting → a limited liability company plus Estonian CIT
- IT, low costs, B2B → the 12% lump-sum tax usually wins
Frequently asked questions
Revenue is all the money coming into the business from sales. Income is revenue minus tax-deductible costs. You pay tax on income, not on revenue, which is why costs matter so much.
PIT (personal income tax) is paid by business owners running a sole proprietorship (JDG), a civil partnership, a general partnership, or a professional partnership. CIT (corporate income tax) is paid by limited liability companies, joint-stock companies, and other legal entities.
If your customers are businesses (B2B), it's almost always worth registering for VAT: they deduct the VAT on your invoices, so being VAT-registered doesn't raise the price for them. If you sell to consumers (B2C), the VAT exemption up to PLN 200,000 in turnover can work in your favor, since it genuinely lowers your prices.
The lump-sum tax is a simplified form of PIT: you pay tax on revenue (not income), at a rate that depends on the type of business (from 2% to 17%). You can't deduct costs, so it pays off when your costs are low or your margins are high.
Estonian CIT is a system where a company doesn't pay tax until it pays out profit. Instead of settling CIT every year, the company reinvests its profits tax-free. Tax only kicks in when a dividend is paid, or a payout is made to a shareholder.
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