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Polish law
Home > Polish law > Tax law > Taxes > Value added tax (VAT)

Value added tax (VAT)



Overview

Polish regulations on Value Added Tax (VAT) are based on the EU legislation. It means that principles of VAT taxation in Poland are in many cases the same as in other EU member states.

Basic transactions subject to VAT are i.a. supplies of goods and supplies of services deemed to be made in Poland. In some situations also free of charge supplies of goods or services can be subject to VAT.

In 2018, the main VAT rates applicable to local supplies in Poland are as follows:


Category

VAT rate:

standard VAT rate

23%

reduced VAT rate - supplies of certain foodstuffs, medical products, restaurant and hotel services and supplies covered by the social housing policy

8%

reduced VAT rate - applied to supplies of certain foodstuffs (e.g. bread, dairy products, meats), certain kinds of printed books

5%

Zero VAT rate - applied to e.g. supplies of certain vessels and aircrafts, services related to air and sea transport, international transport services, services related to import and export of goods

0%


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VAT in international trade - provision of goods

VAT taxpayers selling goods to buyers in EU member states may apply 0% VAT rate and treat transaction as the intra-EU supply of goods. The condition to apply zero rate is to collect documents confirming that goods were dispatched (by the seller or by the buyer) to the buyer in another EU member state. Also non-transactional transport of goods to another member state (“transfer to another member state”) in some situations is reported as the intra-EU supply of goods. It is also possible to treat movement of goods do call-off stock in another member state as the intra-EU supply of goods which is taxable at the moment when goods are released from the call-off stock, without an obligation to be registered for VAT in the country where the call-off stock is located.

0% VAT rate is also applicable to export of goods, which takes place when goods are dispatched from Poland outside the EU territory. A dispatch can be conducted by the seller (direct export) or by the acquirer (indirect export). To apply 0% VAT rate it is necessary to obtain customs documents confirming that goods have left the EU territory.

In case of acquisition of goods transported from another EU member state to Poland, Polish VAT taxpayer is obliged to report such transaction as the intra-EU acquisition of goods which is subject to reverse charge. It means the transaction should be at the same time and in the same amount reported as a taxable sale (output VAT) and as a purchase of goods (input VAT). As a result, such transaction is in most cases financially neutral. Also non-transactional transport of goods from another member state is in some situations reported as the intra-EU acquisition of goods. In the latter case it is possible to apply call-off stock simplification - an then movement of goods is taxable when they are released from the call-off stock, not at the time of their movement (it does not apply to goods for distribution).

Imports of goods subject to VAT in Poland are deemed to mean imports of goods from outside the EU into Poland. VAT on import of goods can be settled in a few procedures. Under general rules, output VAT on import is payable together with other customs duties and then when customs documents are received it is possible to deduct it as an input VAT in the VAT tax return. Under certain conditions it is possible to settle import of goods in the VAT tax return (output VAT and input VAT is then subject to reverse charge) where simplified customs procedures are applied. When centralized clearance procedure applies (import of goods to all member states is reported only in one of them), import of goods for VAT can be settled in the import return where all transactions from one month are reported.

The VAT exemption applies e.g. to import of goods subject to inward processing, goods subject to temporary clearance with full customs duty exemption, advertising materials, and product samples. It is also possible to exempt from import VAT goods which are to subject to the intra-EU supply of goods.


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VAT in international trade - provision of services

Polish regulations on place of supply of services are in line with similar regulations applied in other EU member states. In case of services supplied between taxpayers (B2B basis) with their business established/place of residence/fixed establishment in other countries, the primary place of taxation is the country of where is the business establishment/place of residence/fixed establishment of the entity purchasing the service. The opposite applies to services provided by a taxpayer to a non-taxpayer entity (B2C basis) - that case the business establishment/place of residence/fixed establishment of the service provider is the key factor.

In the case of cross-border supplies of services, VAT obligation in Poland may arise if the place of supply. As an effect, according to the general rules, VAT will be payable in Poland on service transactions between taxpayers from different countries only if the service recipient has its business establishment/place of residence/fixed establishment in Poland. However, in case of services provided by a Polish taxpayer to a non-taxpayer entity, VAT will be payable in Poland if the service provider has its business establishment/place of residence/fixed establishment in Poland. There are several exceptions to the above rules - for instance, the place of taxation of services related to an immovable property is always a place where an immovable property is located. The place of taxation of restaurant and catering services is the place (country) of their actual provision.

VAT exemptions

There is a list of activities that may be exempt from VAT. As a result of the exemption, input VAT linked with such supplies cannot be wholly or partially deductible. Typical VAT-exempt activities include:

  • financial services (granting of credits, maintaining bank accounts, currency exchange), other than leasing, factoring and consulting,
  • insurance and reinsurance services,
  • certain medical services,
  • some educational services,
  • welfare services,
  • social security services,
  • some culture and sports-related services.

There are also some supplies related to real property which can be exempted, for instance letting for housing purposes or their sale (at least two years after a first occupation). In some cases it is possible to choose an option and charge the sale of real property with VAT.


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VAT deduction and refund

Taxpayers may reduce the amount of output VAT by the amount of input VAT when purchasing goods and services, provided that the purchases are related to a sale subject to VAT.

In case of input VAT connected with both taxable and exempted sales, the VAT taxpayer is entitled to pro-rata deduction and an amount of such deduction is calculated in proportion to the share of sales taxed in the entire sales of the taxpayer.

There is an unconditional exclusion of VAT deduction on restaurant and accommodation services.

Limitations of input VAT deduction applies to expenses on:

  • purchase (including leasing) and use of passenger cars as well as fuel - it is generally possible to deduct 50% of input VAT, although when a car is deemed to be used only for business purposes, i.e. classified as “a special purpose car” or detailed mileage records are kept, full deduction is possible,
  • purchase of goods and services related both to economic activities and other activities (applies mainly to public sector and foundations),
  • purchase or update of real property used both for economic activities and for private purposes.

The surplus of input tax over output tax can be carried forward or refund. A refund, as a rule, is made within 60 days from the date of filing an appropriate VAT return. It is also possible to obtain VAT refund within 25 days on additional conditions, for instance all purchase invoices are fully paid. From July 2018 it will be possible to obtain VAT refund within 25 days without any prerequisites, but it will be transferred to VAT account what means that money received would be available mainly for paying input VAT in split payment, but to have them transferred into a bank account it will be necessary to obtain a prior consent of tax authorities.

If no taxable sales or sales outside of Poland are concluded, the taxpayer may apply for a tax refund within 180 days of filing the VAT tax return.

The tax refund is, as a rule paid into the bank account indicated by the taxpayer. It can however, constitute security bank credit.


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Reverse charge in local transactions

Certain domestic supplies of goods and services are subject to reverse charge mechanism, which means that the seller invoices a sale without VAT and a purchaser is liable to settle a transaction - i.e. to report both output and input VAT. Domestic supplies of goods subject to reverse charge are for instance portable computers, mobile phones, game consoles and metal scrap. While supplies of services cover i. a.: construction services provided by the subcontractors and sale of emission allowances.

Also supplies of goods by the foreign taxpayer not having a business establishment or a fixed establishment in Poland made for Polish taxpayers are subject to a reverse charge. Thus, foreign taxpayers do not have to register for VAT in Poland because of such transactions.


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Registration

Entities planning to conduct business activities subject to VAT in Poland must file a registration form before the date of the first taxable activity. If they also plan to conduct intra-EU transactions they must be also registered for such purposes.

Taxpayers with the annual sales that do not exceed PLN 200,000 are exempt from VAT. However, the exemption cannot be applied to foreign taxpayers. The taxpayers may choose to opt for taxation of his sales upon prior notification of the tax authorities.

In order to register for VAT purposes in Poland, entities without business establishment/ place of residence/fixed establishment in the EU must appoint a tax representative. Tax representatives are responsible for the tax liabilities of the taxpayers they represent.

In Poland it is not possible to form VAT groupings in order to settle some entities as one taxpayer and to file one VAT return.

Since January 2017 tax authorities were empowered for deregistration of entities which i.a. are deemed non-existence, cannot be contacted, did not submit VAT return for 6 months, issued invoices documenting fictitious activities.


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Tax returns

Taxpayers file monthly VAT returns by the 25th of the following month or quarterly VAT returns by the 25th of the following month. However, quarterly VAT returns may be filed only by “small taxpayers” (annual sales of less than EUR 1,200,000).

As a rule, VAT liable is paid to the tax office at the time of filing an appropriate VAT return.

Taxpayers making intra-EU supplies of goods and services are required to submit monthly recapitulative statements (EC sales list).

Some taxpayers are also required to file statistical information (INTRASTAT) on intra-Community commodity transactions.

What is more, taxpayers making domestic supplies of goods and services subject to reverse charge are required to file also monthly domestic recapitulative statements.

VAT returns and recapitulative statements are filed electronically.

Additionally, all VAT taxpayers (other than exempted) are obliged to file monthly SAF_T by the 25th of the following month, even if they file quarterly returns.


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Related parties

In the case of transactions between related parties, tax authorities may assess VAT tax base at a market value of transaction if it turns out that the relationship affected the calculation of the remuneration for the supply of goods or provision of services and one party to the transaction is a taxpayer not eligible to deduct VAT.

The right to assess the tax base applies if there are family, capital or financial links between counterparties or persons in managerial or supervisory roles in the counterparties' business. Capital links apply if one counterparty has at least 5% voting rights that represent at least five per cent of all voting rights, or disposes of such rights directly or indirectly.


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Split payment

From July 2018, a split payment mechanism was introduced and it allows the buyer of goods or services to pay purchase invoices using a special kind of a bank transfer. As a result of its application, a part of the payment corresponding to the net amount will go to the seller's business account, and the part corresponding to the input VAT to a special account called a VAT account. The use of funds on the VAT account is limited, because they are allowed to be used mainly for payment of purchase invoices under a split payment mechanism, payment of VAT to the tax office, refund of amounts resulting from a correcting invoice (credit notes). In addition, the taxpayer will be able to submit an application for the transfer of funds on the VAT account to a settlement account, which will, however, require the prior consent of the tax authorities.

The application of the split payment mechanism is voluntary - the purchaser can decide on its application. It is acceptable to stipulate in the contract that the buyer will not apply it.

The benefit of using the split payment mechanism for the purchaser is the exclusion of the provisions on VAT sanction (additional amount to pay for the undervaluation of VAT), increased interest on tax arrears, joint and several liability in the sale of sensitive goods - in relation to the amounts paid using it. The use of a split payment mechanism is declared to be a factor proving due diligence of the buyer what means that the right to deduct VAT from transaction should not be challenged.


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Last update: July 2018


Prepared for the Polish Information and Foreign Investment Agency by:

MDDP - Tax Advice Company


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