What is tax planning?
Before we move on to discussing practical examples of tax planning activities, we should first explain what this term means – what exactly is tax planning? Tax planning involves making use of the rights and mechanisms provided for by law, such as forms of taxation, tax reliefs and exemptions, and other solutions, so that the overall tax settlement is tailored as closely as possible to the specific nature of the business conducted by the entrepreneur. This does not mean evading tax liabilities, but rather making informed use of the rights to which one is entitled. In this way, by utilising legally available methods, an entrepreneur can improve their company’s financial situation without exposing themselves to the risk of irregularities during a tax audit or tax proceedings.
Tax planning – examples
- Form of taxation for entrepreneurs
Once business operations have commenced, one of the first decisions an entrepreneur must make is the choice of income tax regime for their business. Sole traders have a choice of three basic tax regimes: the tax scale, the flat-rate tax or the flat-rate scheme. Each of the above tax regimes has its own distinct characteristics and rules:
- general rules (the so-called tax scale) – a rate of 12% on income up to PLN 120,000 and 32% on the excess, with a tax-free allowance of PLN 30,000 and the possibility of claiming tax relief;
- flat-rate tax – a fixed tax rate of 19% on income, regardless of the amount, without taking into account the tax-free allowance;
- lump-sum tax on recorded revenue – a simplified form of taxation where tax is calculated on revenue (without deducting costs). Lump-sum rates depend on the type of business and range from 2% to as much as 17%.
The choice of taxation method for a business should be preceded by a detailed analysis – one must take into account not only tax rates but also other consequences such as: social security contributions, health insurance contributions, accounting rules and the scope of liability.
- Tax reliefs and exemptions
Tax law provides for a range of tax reliefs that allow the tax base or the tax amount itself to be reduced. These include, for example, the research and development relief (R&D relief), the robotisation relief, and preferential taxation of income from intellectual property rights (IP BOX relief). However, it is important to remember that claiming tax relief often requires meeting specific conditions set out in the regulations and providing proper documentation of expenses. Consequently, it is vital to keep track of changes to tax regulations to stay up to date – the list of tax reliefs and exemptions, as well as the conditions for claiming them, are constantly changing. Some reliefs are abolished, new preferential measures are introduced, and so on. Consequently, business owners should regularly review the regulations concerning tax reliefs and exemptions.
- Frequency and method of tax settlement
In certain cases, entrepreneurs have a choice regarding the frequency of filing tax returns and settling tax – they may opt for quarterly settlements instead of monthly ones. This applies to both income tax and VAT. However, this choice is only possible if the conditions laid down by the legislator in the regulations are met (e.g. the status of a so-called small taxpayer). It is also worth noting the option to use the cash basis method for VAT, which means that the tax is settled only after payment has been received from the customer. A new development introduced in 2025 is the option to use the cash basis method for PIT as well – selected businesses (meeting the statutory criteria) may settle their tax only once they have actually received payment from their customer for the service provided or goods sold.
Tax planning – Summary
In summary, tax planning is a process requiring commitment, regular monitoring of changes in legislation and legal and business analysis. The proper use of available tax solutions, such as choosing a form of taxation or applying tax reliefs or exemptions, allows, on the one hand, to protect the entrepreneur’s interests and, on the other, to develop the business in accordance with the law. In case of doubt or the need for a detailed analysis of the company’s situation, it is worth consulting professionals.
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HWW Hewelt Wojnowski Lindner i Wspólnicy is a Warsaw law firm advising businesses and public entities. We combine experience in commercial law, energy, tax, data protection and litigation to deliver solutions tailored to our clients’ business realities.
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