A Simple Guide to Value-Added Tax (VAT) in Poland in 2022
Value-added tax (VAT) is a consumption tax levied on almost everything sold in the European Union. It is an indirect tax paid on various goods and services and is also known as the Goods and Services Tax (GST) in some countries.
In Poland, the tax is called Podatek od towarów i usług. However, the English term VAT is widely used both officially and in everyday life.
Polish suppliers tax customers at the official VAT rate and send the collected amount to the National Tax Administration, known locally as Urząd Skarbowy.
European Union legislation & Polish VAT rate
The VAT rate in Poland stands at 23%. The country's regulations on VAT are based on the current European Union (EU) legislation, and its general principles are very similar to those in the other EU Member States.
The EU legislation allows Member States to set their VAT rate individually. Due to this, no two States have the same tax rate. The legislation also allows States to choose which goods and services are subject to reduced VAT rates.
Please note that all the information in this article is from the official Polish Tax Portal.
VAT rates and filing
The standard VAT percentage everywhere in Poland -- from Warsaw to Krakow -- is 23%. At the same time, just like other European countries, Poland has numerous exemptions for goods and services, charged at reduced rates.
Given below are the goods and services available at reduced VAT rates from 25 March 2020 according to its Ministry of Finance:
8% — You should collect 8% VAT for items listed in Annex 3 of the VAT Act and Annex. These are:
- Goods supplied for the Social Housing Programme (for houses not bigger than 150 sq mt).
- Pharmaceutical products and various medical equipment for the disabled.
- Goods and services used in agricultural production.
- Newspapers and various kinds of periodicals, including e-publications (other than those predominantly or entirely comprising video or music).
- Food products required every day, such as spices, sugar, and some processed and preserved food items.
5% — You should use 5% tax for items listed in Annex 10 of the VAT Act. These include:
- Certain agricultural supplies.
- Basic everyday foods such as bread, fish, meat, fruits and vegetables, bakery products, dairy products, juices, eggs, broths, soups, various homogenized and diet-related foods.
- Various products for children, food for infants and toddlers, and hygiene-related products such as nappies, pacifiers, car seats, sanitary napkins, and tampons.
- All kinds of printed books, books on tapes and disks, and other forms of media.
- E-books and special periodicals.
0% — Goods and services that attract 0% VAT include:
- Exported goods.
- Intra-European Union supply of goods.
- Supplies that fall under the 'TAX FREE for tourists' category.
- Supplies to the dedicated free zones, customs warehouses, and international transport services.
- Sea vessels used in passenger transport as well as for industrial, commercial, and fishing purposes.
- Certain EU import/export-related services.
If you run an IT company in Poland and provide services to businesses in the other EU Member States or non-Member States, you do not need to charge your customers Polish VAT. Instead, your Polish company can deduct the VAT you paid on related expenses, termed input vat.
Input and Output VAT
Input VAT is the VAT amount included in the price of vatable goods or services you purchase for your business.
Output VAT is VAT that you collect when you sell goods and services, provided that you are on the VAT Register.
The VAT due is the Output VAT minus the Input VAT. Input VAT may be deducted from Output VAT when a business receives an invoice for goods or services purchased.
Usually, the Polish terms for Input and Output VAT are used. The Output VAT is called vat należny, and the Input VAT is called vat naliczony.
The monthly VAT report should be filed before the 26th of the following month.
You need to file the quarterly VAT report before the 26th of the month following the quarter in which the obligation arose.
Polish VAT taxpayers need to maintain their business accounts under applicable national laws per the Polish Accounting Act, Dziennik ustaw [journal of laws] from 1994, no 121, item 591, as amended by the law.
VAT for e-Commerce in Poland
In July 2021, Poland implemented the VAT e-Commerce Package introduced to revamp the EU's VAT collection and tighten tax collection for cross-border transactions between companies and consumers (B2C).
Previously, suppliers making mail-order sales could choose to charge local VAT in the country of dispatch, as long as the sale amount was less than the threshold set by each EU country (ranging from €35,000 to €100,000). If the sale amount exceeded the threshold, the supplier had to register for VAT purposes and settle local VAT in the destination country.
Many small businesses avoided registration for VAT purposes in the destination country. They thus avoided paying supplementary costs related to VAT registration, VAT compliance, and tax/legal support.
The VAT e-Commerce Package extends the current procedure for settling VAT on telecommunications, broadcast, and electronic services offered to consumers called the Mini One-Stop Shop (MOSS). It has established a new One-Stop-Shop (OSS) procedure and introduced the Import One-Stop-Shop (IOSS).
Under the IOSS procedure, businesses must file a single return with information on sales made to consumers across various Member States (taxed at local VAT rates). The businesses' State will then transfer the VAT to the Member States of consumption.
VAT-OSS in Poland: Key implications
- Polish companies that are required to settle VAT on their sales made in the other Member States (after exceeding the €10,000 sales threshold) do not need to register for VAT in those States and can submit a single VAT declaration in Poland instead.
- To qualify to use the procedure, a company must submit a VAT-OSS registration application. This application should necessarily be submitted before the first day of the quarter from which the procedure is to be applied (with certain exceptions).
- The VAT-OSS return is to be filed quarterly and is independent of the JPK_V7M / JPK_V7K forms.
- Taxpayers using the VAT-OSS procedure have to analyze the prevailing VAT rates in the Member States of consumption to accurately calculate the VAT due on each sale.
- Using the VAT-OSS procedure is not mandatory; however, once OSS-registered, the taxpayer will be required to use it to declare and remit VAT on all supplies and services covered by the procedure.
- The VAT-OSS procedure cannot be used to recover Input VAT. This means that businesses remitting VAT abroad without having a local VAT identification number in that Member State will still need to apply for a VAT refund (under Directive no. 8 or 13).
For someone who has a remote team and is keen to learn about various taxes, this article is worth a read, Remote Hiring, Payments, Compliance And Taxes – All You Need To Know.
If you have a business in Poland and the total value of your sales did not exceed PLN 200,000 in the last fiscal and will not exceed the threshold this year as well, you can benefit from tax exemption.
Similarly, if you start a business during the year, and it does not exceed the proportionate threshold to the period in which the business activities were carried out in that year, you can avail of the tax exemption.
This tax exemption is also called a personal exemption. You can find more information about it here.
In Poland, these goods and services are exempt from VAT:
- Various transactions relating to currencies, intermediation, banknotes, and coins used legal tender (this excludes leasing, or factoring, or consultancy).
- Services related to investment funds, open retirement pension funds, insurance capital funds, insurance and reinsurance services, including intermediation but excluding lease.
- Services connected with the granting of credit or loans, including intermediation.
- Services connected to the granting of guarantees and other forms of security for financial and insurance transactions, including intermediation but excluding leasing.
- Services related to depositing cash.
- Services that operate financial accounts, all other kinds of monetary transactions, including intermediation but excluding leasing.
- The supply of investment gold.
- Certain specific medical services that are part of hospital and medical care.
- Services by dental technicians in a professional capacity. This also includes the supply of dental prosthetic or artificial teeth made by dentists and dental technicians.
- Supply of human organs.
- Supply of blood and milk.
- Medical transport services.
- Certain educational services such as foreign language teaching.
- Specific social work services.
- Care services for children, people with disabilities, people who suffer from chronic diseases, and those in older people shelters.
- Certain cultural and sporting services or physical education-based services.
- Certain charity activities.
- Gambling activities.
- The renting or leasing of certain residential property used for housing purposes only.
- Residential property management services which work on a contract basis.
- The sale of a building (or its premises) after two years from when it was first occupied.
- The lease of land that was intended for agricultural purposes only.
- The supply of various agricultural products by flat-rate farmers resulting from their agricultural activities. And, the supply of agricultural services by flat-rate farmers.
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