Tax department

Lump-sum tax on registered revenue without deductible costs

Lump-sum tax on registered revenue is a possibility to apply a different, simplified form of taxation – other than the general one – to some categories of revenue earned by physical persons. In practice, it usually concerns those entrepreneurs who do not incur significant tax deductible expenses. It allows them to apply low tax rates or exempt themselves from the obligation of maintaining full bookkeeping.

As the very name suggests, the lump-sum tax on registered revenue, does not concern to the “take-home” income, but to the total revenue earned by physical person. One can only reduce such revenue by the health insurance contribution. The lump-sum tax may be chosen by new entrepreneurs as well as by those who are already running business. Although certain limitations apply to the latter.

Limitations

First of all, entrepreneurs with their revenue exceeding the amount of 250 thousand Euro in the previous year, cannot choose the lump-sum tax. Secondly, the business activity must belong to one of the following categories: non-agricultural business activity, revenue from lease or sublease, tenancy or subtenancy. However, the lump-sum tax on registered revenue cannot be applied to business such as: pharmacies, pawnshops or foreign currency exchange.

Those who decide to apply the lump-sum form of taxation cannot take advantage of the pro-family tax relief nor joint taxation of spouses. However, they still may be the beneficiary of rehabilitation, medication or donation related tax deductions. Remarkably lower lump-sum tax rates – 3%, 5,5%, 8,5%, 17% or 20% – depending on the kind of the business activity compensate all these limitations.

CGO Legal law firm provides services to those who already run a business and would like to switch to lump-sum form of taxation as well as those who are willing to start business activity.

If You want to learn more about lump-sum tax on registered revenue without deductible costs, please contact us.