The financial year and the tax year are terms that often overlap, but they cannot be used interchangeably. In limited liability companies, the financial year is determined at the stage of drafting the articles of incorporation. For newly established limited liability companies, established in the second half of the calendar year, it is possible to extend the first financial year. Under certain conditions, the regulations also allow the adopted financial year to be changed.
According to the general principle set forth in Polish tax law, the tax year is the calendar year. Such a rule is applied to individuals. An exception to this rule occurs for corporate income taxpayers (most often limited liability companies), which have the option to choose the duration of the financial (tax) year.
Financial year
According to the Polish Accounting Act, the financial year is the calendar year or any other period of twelve consecutive full calendar months, also used for tax purposes.
The financial year an its change is determined by the statutes or deeds under which the entity was established.
When an entity commences operations in the second half of the financial year adopted, the books and financial statements for that period may be merged with the books and financial statements for the following year.
In case the financial year changes, the first financial year after the change should be longer than 12 consecutive months.
Tax year
Under Polish tax law, the tax year is the calendar year, unless otherwise provided for in the tax act.
Pursuant to the Corporate Income Tax Act, the tax year is the calendar year, unless the taxpayer stipulates otherwise in the articles of association or the company deed, or
in another document regulating the rules of organisation of other taxpayers – then the tax year is the period of consecutive twelve calendar months.
It should be noted that changing the fiscal (tax) year to something other than the calendar year has consequences only for reporting and corporate income tax purposes. For other taxes, such as VAT, personal income tax (e.g. on remuneration paid), the tax year will always be the calendar year.
Exceptions for twelve months financial year
In principle, a financial (tax) year lasts for a period of twelve consecutive calendar months. There are, however, certain exceptions to this rule.
If, under separate regulations, there is an obligation to close the books of account (to draw up a balance sheet) before the end of the tax year adopted by the taxpayer, the tax year shall be deemed to be the period from the first day of the month following the end of the previous tax year to the date of closing the books of account. In such a case, the subsequent tax year shall be deemed to be the period from the date of opening the books of account to the end of the tax year adopted by the taxpayer. That situation will occur e.g. when the company has been put into liquidation.
Change of financial year
In order to change the company’s financial year, a shareholders’ resolution amending the articles of association is required. This resolution should be reported to the court of registration, while in terms of tax law, the relevant tax office must be informed of the change of year.
Pursuant to the tax regulations, in case of changing the financial year, the transitional tax year (the first one after the change) is considered to be the period from the first month following the end of the previous tax year to the end of the newly adopted tax year. That year shall be not shorter than twelve nor longer than twenty-three
It follows from the regulations that an effective change of financial (tax) year by a corporate income taxpayer (e.g., a Polish limited liability company) requires the following steps:
- amending the articles of association and adopting a financial (tax) year other than the calendar year,
- notifying the tax authorities about the amendment to the articles of association regarding the change of the fiscal (tax) year in the annual CIT tax return filed for the tax year preceding the first tax year after the change.
Once these requirements are met, the transitional financial (tax) year may not be shorter than twelve nor longer than twenty-three consecutive calendar months. The beginning of the transitional financial year will be the first day of the month following the end of the previous financial (tax) year and that year ends on the last day of the newly adopted financial (tax) year.
It is not possible to change the current (ongoing) financial year.
Scenario 1
The shareholders of a company whose financial year corresponded to the calendar year decided to change it to last from February 1 to January 31.
The articles of association were amended in December 2023. Therefore, 2024 is the company’s transitional financial (tax) year. It began on January 1, 2024 and will continue through January 31, 2025, with subsequent financial years covering the periods from February 1 through January 31 of the following year, respectively.
Financial statements and tax returns will be prepared for the following periods:
- transition year – January 1, 2024 to January 31, 2025 (13 months)
- subsequent year – February 1, 2025 through January 31, 2026 (12 months).
Scenario 2
The shareholders of a company whose financial year corresponded to the calendar year decided to change it to last from February 1 to January 31.
The articles of association were amended in January 2024. Therefore, 2025 is the company’s transitional financial (tax) year. It began on January 1, 2025 and will continue through January 31, 2026, with subsequent financial years covering the periods from February 1 through January 31 of the following year, respectively.
Financial statements and tax returns will be prepared for the following periods:
- transition year – January 1, 2025 to January 31, 2026 (13 months)
- subsequent year – February 1, 2026 through January 31, 2027 (12 months).
In this case, it is important to note that Polish regulations do not allow changing the fiscal year during its duration.
Scenario 3
The shareholders of a company whose financial year corresponded to the calendar year decided to change it to last from December 1 to November 30.
The articles of association were amended in December 2023. Therefore, 2024 is the company’s transitional financial (tax) year. It began on January 1, 2024 and will continue through November 31, 2025, with subsequent financial years covering the periods from December 1 through November 31 of the following year, respectively.
Financial statements and tax returns will be prepared for the following periods:
- transition year – January 1, 2024 to November 30, 2025 (23 months)
- subsequent year – December 1, 2025 through November 30, 2026 (12 months).
Scenario 4
The shareholders of a company whose financial year covered the period from October 1 to September 30, decided to change it to the calendar year.
The articles of association were amended in August 2023. Therefore, 2023/24 is the company’s transitional financial (tax) year. It began on October 1, 2023 and will continue to December 31, 2024, with subsequent financial years covering the periods from January 1 to December 31 of the following year, respectively.
Financial statements and tax returns will be prepared for the following periods:
- transition year – October 1, 2023 to December 31, 2024 (15 months),
- subsequent year – January 1, 2025 through December 31, 2026 (12 months).
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