Direct tax

A tax is levy without consideration by virtue of the economic capacity shown by the taxpayer, because of certain facts, acts or legal transactions provided for in the taxable event defined by law. Taxes are one of the main sources of a country's revenue, along with administrative fees and special contributions. Taxes being the most important. According to the article 302 the of Official Bolentin of the Spanish State (2003).

Direct taxes

In direct taxes, the capacity to contribute is deduced from the personal characteristics of the taxpayer and, therefore, they are applied on the income, richness, or other manifestations of the taxpayer's wealth and, in them, it is normally the taxpayer himself who settles and pays them directly to the corresponding Tax Administration.

The main difference between direct and indirect taxation is that direct taxation is levied on the capital of our income or belongings. While indirect tax is levied on the acts of consumption that are conducted with such wealth, or the acts of transmission of the goods that are part of the patrimony.

Direct taxes in European Union

The European Union does not have its tax system and does not levy taxes, it leaves autonomy to each member country's government. Therefore, each nation decides the amount it collects from each taxpayer and the subsequent percentage of public spending. However, the EU plays a regulatory role with its member countries, overseeing their fiscal rules in certain aspects, those related to EU policies affecting businesses and consumers .

The direct taxes of two important countries of the European Union will be developed in detail below, Spain and Poland, to better understand how they work :

• Concerning direct national taxes in Spain, the most important is the personal income tax. As its name indicates, it is responsible for taxing income derived from personal income. It is applied to the economic capacity, which is why we classify it as a direct tax.

In terms of how it works, the Treasury takes all your gross income and divides it between those that form part of the general and savings base. On this total income, it begins to subtract reductions such as those derived from contributions to pension plans.

It is a tax paid by individuals who are residents of Spain or taxpayers on their income obtained during a calendar year. This levy is based on the tax principles of progressivity, generality, and economic capacity. Income Tax campaigns begin at the beginning of April and end at the end of June.

Corporate income tax is the second most common tax in Spain. In this case, the tax is levied on the profits that the companies generate annually. Currently, in Spain, the tax rate is 25% and 15% for newly created entities. To obtain the amount payable for corporate income tax, the difference between the income obtained and the expenses incurred during the year is calculated. Extra-accounting adjustments or corrections, if necessary, will then have to be made :

• Next, an analysis of the Polish tax system will be conducted to develop the main direct taxes and how they work.

The Polish tax system is based on three pillars: the Constitution of the Republic of Poland, national tax rules, and EU tax rules. VAT and excise taxes are one of the main sources of revenue for the Polish budget. The Polish tax system has developed rapidly over the last 25 years :

Personal Income Taxes (PIT), it is paid by both individuals and entrepreneurs. Everyone who receives income in a given year must file a personal income tax return. Children under the age of 18 must be included in their parents' affidavits, while adult citizens must self-declare, provided they are paid, of course. The tax return must be filed on a form that shows not only the income we receive from the work we do but also the allowances, deductions, or expenses we have to earn that income.

As for the operation of personal income tax, if income does not exceed PLN 85 528, the tax rate is 18% minus a tax deduction of 556 ZL 02 gr. If income exceeds 85 528 PLN, tax is charged at 14 839 ZL 02 gr PLN + 32% of the deductible amount above 85 528 PLN.

The fiscal year coincides with the calendar year and applications are submitted annually, with an application deadline of April 30. Taxation is progressive and distinguishes three levels and their corresponding tax rates.

The Corporate Income Tax rate is 19%.In the case of income earned by so-called non-residents, the rate of 20% of income from interest, copyrights, fees for services rendered in the field of entertainment or sports activities, services like consulting or accounting, and so on.

The tax base, in principle, is the income after deduction of, among other things, any donations for specific purposes, subject to a 10% limit on their amount, in relation to that income.

In conclusion, it should be noted that the collection of taxes in countries is one of the tasks of governments since the revenues derived from this activity will be the subsequent public expenditure. In addition, having a consolidated tax system generates a great attraction for the country, always considering the annotations and recommendations of the European Union.

Footnotes

Direct tax — recommended articles

Rate base — Gross revenue — Tax — Consumer income — Limited partnership — Taxation principles — Community foundation — Preliminary expenses — Disposable personal income

References

• Durra, J.M.D., & Esteller, A. (2014). Tax professionals' view of the Spanish Tax System: Efficiency, Equity, and Tax Planning. Dialnet.
• Tax expenditures in direct taxation in EU Member States. (2014), European Commission Directorate-General for Economic and Financial Affairs. Dialnet.
• Zorman, G. (2007). New dividend taxation system in Poland. Dialnet.
• System Podatkowy w Polsce (2022), Chudzik i Wspólnicy Radcowie Prawni.

Author: Mónica Guijarro,Gabriela Valera,Zaira Bancells