Polish Deal – Changes in the scope of the Polish Value Added Tax (VAT)

On November 15, 2021 the President signed into law the Act of 29 October 2021 amending the Personal Income Tax Act, the Corporate Income Tax Act and certain other acts (Polish Journal of Laws 2021, item 2105), which is part of the program known as the “Polish Deal” and introduces a number of changes in Polish tax regulations, most of which are to be effective from January 1, 2022 onwards.

We present the most important changes in the scope of the Polish Value Added Tax (VAT) introduced by this Act: 

Introduction of the possibility to create a VAT Group

A group of financially, economically and organizationally related entities that enter into an agreement to form a VAT Group will be able to become a VAT taxpayer.

All three types of relationships must be present during the entire period of existence of the VAT Group.

The basic regulation for the operation of the VAT Group is that the supply of goods and services by the members of the Group are not taxable transactions. This means complete tax neutrality within the VAT Group.

The VAT group rules are scheduled to take into force from July 1, 2022.

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Optional resignation from VAT exemption for financial services

Effective January 1, 2022, a taxpayer may waive the exemption for services referred to in Article 43(1)(7), (12) and (38) to (41) of the Polish Value Added Tax Act of March 11, 2004 – which are provided to taxpayers and allow them to choose to be taxed under the following conditions:

• is registered as an active taxpayer of VAT;
• he submits to the head of tax office a written notice on the choice of taxation of these services before the beginning of the settlement period from which he resigns from exemption.

The taxpayer who provides exempted services has no right to deduct input VAT on the purchase of goods and services used to provide these services. Therefore, resignation from the exemption will allow the input tax to be deducted on purchases.

The taxpayer may, not earlier than after 2 years, counting from the beginning of the settlement period from which he has chosen to tax the services, again use the exemption from taxation of these services, provided that he submits to the head of tax office a written notice of resignation from taxation, before the beginning of the settlement period from which he will again use the exemption.

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