Cash PIT 2025 – what conditions must be met? When to submit the declaration?

Cash PIT vs. material method

Thanks to the cash PIT, entrepreneurs can postpone tax payment until they receive payment for an invoice from a contractor. Using the cash method is voluntary, but its selection obliges the entrepreneur to use it throughout the tax year. Moreover, the entrepreneur must keep detailed records of invoices documenting revenues settled using this method.

So far, the accrual method of tax settlement has been used. The date of issue of the invoice is crucial in it for determining revenue. This means that revenue is the amount that the entrepreneur should receive for the goods or services sold, regardless of whether they actually received it. The same applies to costs - they can be included even if they have not been paid yet. Although this method is common, entrepreneurs often point out that it is unfair because they have to pay tax before they receive money from contractors.

3 conditions for using the cash PIT

New regulations allow entrepreneurs to use the cash method when settling PIT. Thanks to this, it is possible to postpone the moment of taxation of income until the receipt of payment for invoices.

This opportunity is available to both novice entrepreneurs and those who are already running a business, provided that certain conditions are met:

1. Revenue limit

The new solution will be used by entrepreneurs who conduct business on a small scale. The condition is that the revenue from this activity in the previous year did not exceed PLN 1 million. This rule also applies to inherited enterprises, where the revenue of the deceased entrepreneur is also taken into account.

2. Tax Income and Expenditure Ledger

By choosing the cash method, the entrepreneur automatically gives up keeping full accounting books. Instead, they must keep simplified accounting – a Tax Income and Expenditure Ledger.

3. Submitting a cash method declaration

The third condition is the formal requirement to submit a declaration of choosing the cash method. This declaration must be submitted in writing to the appropriate head of the tax office by 20 February of each tax year. For entrepreneurs starting their business during the year, a different deadline applies - by the 20th day of the month following the commencement of business. However, if the commencement of business took place in December of the given tax year, the statement must be submitted by the end of the tax year.

Individuals who independently run a business activity can use the cash PIT. This means that the activity does not have to be run alone - you can hire employees. However, it cannot be used by people running a business in the form of companies, such as a civil partnership or a general partnership, in relation to the revenues obtained within these firms.

Moreover, the cash PIT is a relatively universal solution, as it can be used by entrepreneurs who have chosen:

• Tax scale,
• Flat tax,
• IP box
• Recorded lump sum.

Importantly, the Ministry of Finance emphasizes that the cash method used by one entrepreneur does not impose the same method on his contractor. In practice, this means that a seller using the cash PIT can recognize revenue after receiving payment, while the buyer (e.g. a company) can settle the same cost according to the accrual method, i.e. at the time of issuing an invoice.

Cash PIT - more work and greater risk of errors?

Experts point out that entrepreneurs who decide to use the cash method should be prepared for increased costs and workload related to bookkeeping. This includes detailed comparisons of invoices with bank transfers and the need to separate different types of income and costs. This may mean an additional burden for the entrepreneur in the form of increased bookkeeping costs. The risk of making mistakes may also increase.

The act introducing the cash-based PIT entered into force on 1 January 2025.

Ongoing tax advisory – how can we help?

We help entrepreneurs minimise tax burdens and avoid unnecessary problems. Our tax experts will help you find the best solutions, make the most of tax regulations and achieve your business goals.

Check out our service: Ongoing tax advisory in Poland