VAT for business entities in Poland – basic information

Subject of the tax

In principle, VAT taxpayers are natural or legal persons as well as organizational entities without legal personality carrying out economic activity regardless of the aim or result of that activity.

Economic activity covers all activities of producers, traders or service providers, including entities obtaining natural resources and farmers as well as activities of the professions also when a business activity is performed ones, but in circumstances indicating an intention to perform it regularly.

The exploitation of tangible or intangible property for the purposes of obtaining income on a continuing basis is regarded as an economic activity.

Public authorities and offices providing service for such authorities within the scope of public tasks, excluding activities performed under civil law contracts are not treated as taxpayers.

Object of the tax

The following activities are liable to VAT:
1. supply of goods for consideration and the supply of services for consideration within the territory of the country,
2. exportation and importation of goods,
3. intra-Community acquisition of goods for consideration within the territory of the country,
4. intra-Community supply of goods.
The following activities are not subject to VAT:
• sale of an enterprise or an organised part of an enterprise,
• activities that cannot be the subject of a legally effective contract.

Tax rates

The VAT rates in Poland have changed since 1 January 2011. Furthermore they may change in the subsequent years depending on the ratio of public debt to gross domestic product.

The standard rate is currently 23%

Moreover, reduced rates are applicable for certain goods and services:
• 5% – inter alia for certain food products, including unprocessed food, and certain beverages (e.g. spice plants, fish, meat, dairy products, bread, confectionary, eggs, juices), books printed or published on discs or tapes,
• 8% – inter alia for certain food products and beverages not covered by other rates, new housing structures and housing construction services covered by the social housing program, passenger transport, restaurant services.
Exportation of goods, intra-Community supply of goods and international transport services are subject to 0% rate, under certain conditions.

Exemptions from taxation

According to the VAT provisions some activities are subject to exemption (under certain conditions), in particular educational service, health care and welfare services, some financial and insurance services.

Taxpayers carrying out activities exempt from VAT are not entitled to deduct upon the purchase of goods and services related to exempt activities.

Exemptions for small enterprises

According to the VAT Act taxpayers whose value of sales in the preceding tax year has not exceeded 150.000 PLN are exempt from VAT. A taxpayer who begins his business activities during a year is to be exempt from tax provided that the sales value does not exceed 150.000 PLN, in proportion to the period of conducting business activity in the tax year. The sales value is to be net of tax. Taxpayers may resign from such an exemption.

When the value of sales of goods and services exceeds the above mentioned amount the exemption expires upon exceeding this amount. The surplus of the sales above this amount is to be taxed.

Taxpayers who have lost their right to apply the tax exemption or abandoned this exemption, may again take advantage of the exemption no sooner than one year the end of the year during which this right expired or the exemption abandoned.

Tax deductions

As far as goods and services are used for the purpose of taxable activities, taxpayers are entitled to deduct input tax (with some exceptions).

Tax refund

In case the amount of deductions exceeds the amount of VAT due (for a given tax period). A taxpayer in entitled either to tax refund usually within 60 days of the VAT return submission or carry the excess VAT forward to the following tax period. On the taxpayer’s request (under certain conditions) tax refund may be made within 25 days of the tax return submission.

Tax returns

Generally VAT taxpayers are obliged to submit their tax returns for monthly periods and to pay due tax no later than the 25th day of the following month. So called “small taxpayers” (whose value of sales (including tax) in the preceding tax year has not exceeded the Polish zloty equivalent of 1.200.000 EUR or in case of a brokerage enterprise, managing investment funds, operating as an agent – 45.000 EUR) who apply cash accounting scheme are obliged to submit their tax returns quarterly.

Taxpayers who do not apply cash accounting scheme may submit their tax returns quarterly (upon written notification to the head of their local tax office) provided that they make advance payments of 1/3 of tax for the first and second month of the quarter.