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Automation of the tax settlement process for real estate, agricultural and forestry tax

Tax settlement for local taxes may take a day, a week, or a month. In the case of taxpayers who have a lot of real estates located in many municipalities in Poland or are characterized by high dynamics of changes, the settlement process should be repeated many times by performing a number of similar activities, which often paralyzes the activity of accounting departments during sensitive periods.

More and more companies see the need for improvements in this area, building their own tools that help in a narrow spectrum of the problem or using complex systems such as VSoft Tax Reporting, automating the entire tax settlement process.

What functionalities should the billing automation system have?

IT systems for the automation of tax settlements for real estate, agricultural, and forestry tax allow you, above all, to:

  • Dramatically reduce the time needed to prepare a tax declaration and information on the amount of tax due.
  • Store and archive all information on individual properties, objects of taxation, declarations, and documents. This information is stored in one place, which in the event of control enables quick access to the data collected in this way.
  • Fully automatically calculate the value of the tax due and information on instalments due in accordance with the provisions of the tax law, taking into account data on tax rates and data about the class or tax district, which takes only a few minutes when not done manually, in which case all such information had to be obtained each time from other external sources.
  • Import tax data from external sources, validate both in terms of structural and qualitative correctness, ensure that the information sent outside the system is fully correct and will not necessitate submitting explanations to the office.
  • Export data to both PDF files as well as files that can be placed on the tax boxes of city and municipal offices, using the EPUAP system, which allows you to reduce the additional costs of printing and shipping such documents in a traditional way.
  • Audit and store the history of changes made by the system users, which is not possible in the case of data storage, e.g. in Excel files.
  • Create analytical reports that will enable the preparation of any further statements.
  • Store configuration data about tax authorities, rates, and districts, as well as data on agricultural tax conversion rates, so that all knowledge is available in one place.

Some of the above-mentioned functionalities and their importance in the process of automating the tax settlement will be discussed in more detail in the following paragraphs.

Tax returns

As part of the annual settlement process, each businessman who owns building or agricultural real estate, fields, meadows, orchards, forests, or ponds is required to submit a tax declaration:

  • DN-1 with appendices ZDN-1 and ZDN-2 in the case of real estate tax,
  • DR-1 with appendices ZDR-1 and ZDR-2 in the case of agricultural tax,
  • DL-1 with appendices ZDL-1 and ZDL-2 in the case of forest tax.

Any such information consists of:

  • The main declaration, where, in addition to the businessman’s identification data, there is a summary of all areas broken down into specific subjects of taxation and the calculation of the total financial liability – tax and its division into instalments.
  • Annex 1, which lists the data on all taxable items, including, i.a., such information as location, land and mortgage register number, area and plot number, class, area and tax rate.
  • Annex 2, containing information on all tax-exempt items, where, in addition to data analogous to those in Annex 1, the basis for the exemption should be shown.

Each such declaration is submitted separately to each tax authority, which is the city or commune office. If the businessman owns real estate located in many communes, the number of declarations to be created may be considerable. Additionally, due to the necessity to specify each of the taxable objects separately, the amount of data that must be completed in the attachments to the declaration is significantly increasing. Declarations consisting of several dozen pages are on the agenda.

If we create such declarations manually or using incomplete tools, there is a risk of making a mistake, as well as the need to spend a lot of time on producing and then checking such declarations (starting from the beginning every year). In addition, calculating the tax for a large number of items may cause several people to deal only with one topic, which is of great importance at the beginning of the tax year, where, in addition to settling local taxes, accounting departments are forced to settle other groups of taxes.

The automatic generation of declarations allows you to generate, in a few simple steps, within just a few minutes, complete declarations, both as PDF files, as well as files ready to be placed on tax offices of tax authorities, regardless of whether these declarations go in dozens or hundreds, or the objects of taxation, are counted in hundreds or thousands.

You should also keep in mind that a properly built system will allow, in addition to generating declarations, their storage with all the data, which is of great importance in subsequent accounting periods. It is also helpful if there is a need to create corrections to returns during the tax year, where the appropriate production of the correct declaration may turn out to be a big problem when such information is no longer collected, and the entire settlement process should be carried out again, taking into account the already submitted information.

Tax liability calculation and tax payment

In the case of natural persons, tax decisions along with the tax due calculations are made by the tax authority. In the case of legal persons, it is quite different – the businessman is obliged to identify all taxable objects, record them, calculate the tax liability due, submit a tax declaration, and an appropriate division into tax instalments. In addition, in the case of each change in individual objects of taxation, the businessman is obliged to report such a change by sending a correction of the declaration, containing again the entire data set, taking into account the tax already paid and additional elements, such as unsettled overpayments, etc., to the tax authority.

Tax instalments, depending on the tax type, differ in the amount and date of payment:

  • real estate tax – 12 instalments, payable by the 15th of each month, except January, where the payment is made by 31st January,
  • forest and agricultural tax – 4 instalments payable by the 15th of March, May, September and November.

In the case of having a large number of taxable objects or their constant variability over time, the amount of data necessary to correctly calculate the tax liability, taking into account all provisions of tax law and calculating the value of tax instalments, is not a trivial matter. Additional difficulties, such as a different method of calculating the tax depending on its type, the need to obtain additional information on tax rates for each office separately, as well as the need to collect data on conversion rates per hectare and data on tax districts mean that the time of one-off settlement can be very long.

The systems that automate the tax calculation allow you to minimize the calculation time to a couple of seconds, which, in a busy settlement period, will allow for faster submission of documents and full control over the data.

Tax rates and data necessary to calculate the tax

In order to be able to prepare an appropriate tax declaration as fully as possible, it is important to build a database of tax authorities. Each information regarding local taxes contains the identification data of the tax authority, such as its name, address, and often the account number depending on the type of tax.

In addition to these data, it is necessary that each tax authority is assigned with information about:

  • property tax rates, which vary depending on the municipality;
  • the tax district for agricultural tax;
  • the reduced price of a quintal of rye in the commune for the calculation of agricultural tax.

Each system that automates the tax calculation must also have an extensive configuration:

  • to convert hectares into so-called converted hectares, depending on the tax district and the subject of taxation for agricultural tax;
  • rye quintal prices for a given tax year, distinguishing the conversion rate for land constituting and not constituting an agricultural holding;
  • conversion rates for the subjects of forest taxation;
  • prices of a cubic meter of wood for a given tax year.

Only if we have all this data in one place, we are able to correctly calculate and generate a declaration for local taxes.

VSoft, as a long-term supplier of tax reporting products, has a comprehensive VSoft Tax Reporting tool that automates the process of local tax settlement: real estate, agricultural, and forest tax.

Grzegorz has completed IT studies and three postgraduate courses in IT, data analytics, economics and management. He has been working at VSoft for over 13 years. He is currently a business solutions architect, creating solutions in the area of reporting and taxes. Formerly a developer, a leader and a team manager. Privately, he is passionate about Polish - and not only Polish - old cars, and recently also an avid gravel rider.

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