The Polish Value Added Tax Act of 11 March, 2004 [the VAT Act] is based on EU legislation, and in particular, on the provisions of Directive 2006/112/EC on the common system of value added tax [the VAT Directive].
In 2013, the main VAT rates applicable in Poland are as follows:
Standard VAT rate: 23%
Reduced VAT rate – applied to supplies of certain food items, medical products, hospitality services and community housing: 8%
Super-reduced VAT rate – applied to supplies of certain food items, such as bread, dairy products, meats, and selected publications: 5%
VAT in international trade - supply of goods
Taxpayers selling goods to buyers in EU states may apply the 0% VAT rate as part of the intra-community acquisitions of goods.
The 0% VAT rate also applies to exports of goods defined as the export of goods from Poland outside of the European Union in performance of taxable activities. In order for the 0% rate to be applied, the taxpayer must have appropriate customs forms stating that the goods have exited the territory of the European Union.
In the event of purchasing goods transferred from an EU Member State to Poland, the Polish taxpayer must ensure self-assessment of VAT. This means that the taxpayer should disclose both the output VAT resulting from the taxable activity and the input VAT (due to the fact that this activity constitutes a ‘purchase’ for the purpose of its business). Consequently, as a rule, intra-community acquisitions of goods is a VAT-neutral activity for the Polish taxpayer (the amount of output VAT equals the amount of input VAT).
Imports of goods subject to VAT in Poland are deemed to mean imports of goods from outside the European Union into Poland. In such cases, the import output VAT is typically paid to the customs office that clears the imported goods. Furthermore, a taxpayer that has paid VAT to the customs office may deduct this tax on the basis of the customs document received. In select cases, it is possible to avoid paying VAT to the customs office and settle the import of goods in a VAT return (postponed accounting system) on the terms applicable to intra-community acquisitions of goods. However, the implementation of this solution applies solely to entities using the simplified customs procedure. The VAT exemption applies, among other things, to imports of goods subject to inward processing, goods subject to temporary clearance with full customs duty exemption, advertising materials, and product samples.
VAT in international trade - provision of services
In the case of cross-border services, a VAT obligation in Poland may arise if the place of taxation of a transaction, agreed in accordance with the VAT Act, is Poland.
In this respect, the Polish VAT Act complies with the VAT Directive – for services provided between taxpayers (on a B2B basis) with their registered office/place of residence/permanent place of business in different countries, the primary place of taxation is the country of the registered office/place of residence/permanent place of business of the entity purchasing the service. The opposite applies to services provided by a taxpayer to a non-taxpayer entity (B2C basis).
As a result, under the fundamental principle, VAT will be payable in Poland on service transactions between taxpayers from different countries only if the service recipient has its registered office/place of residence/permanent place of business in Poland. However, in the 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 registered office/place of residence/permanent place of business in Poland.
There are several exceptions to the above rules – for instance, the place of taxation of real property-related services is, in each case, the place (country) in which the real property is located, while the place of taxation of hospitality services is the place (country) of their actual provision.
The VAT Act contains a list of activities that may be exempt from VAT. Typical VAT-exempt activities may include (no optional taxation of these services):
- financial services (lending, 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.
The Polish VAT Act also introduces a VAT exemption for supplies of certain real properties. On the other hand, taxpayers may choose to pay VAT on these services.
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 that is eligible for a VAT deduction (so, as a rule, a sale subject to VAT).
The input VAT reduction concerns the purchase of cars (up to 60% of the VAT on the invoice, but no more than 6,000.00 PLN) or real estate, used partly for purposes other than conducted business activity (according to actual use).
The VAT Act prohibits the deduction of input VAT for the purchase of fuel for cars or hospitality services.
In the case of input VAT concerning both purchases related to activity eligible for a deduction (taxed) and not eligible for deduction (VAT-exempt), the taxpayer is entitled to a partial deduction of VAT.
The surplus of input tax over output tax is, as a rule, refunded within sixty days from the date of filing an appropriate VAT return. The VAT refund period may be shortened to 25 days if additional criteria are met.
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 against borrowings.
Entities that wish to conduct activities subject to VAT in Poland must file a registration form before the date of the first taxable activity. Taxpayers who intend to conduct intra-community transactions must be EU VAT registered.
Taxpayers whose annual sales do not exceed 150,000.00 PLN are exempt from VAT. However, they may choose to pay tax on their business upon prior notification to the director of the tax office.
In order to register for VAT purposes in Poland, entities without a registered office, permanent place of residence or place of business in the European Union must appoint a tax representative. Tax representatives are responsible for the tax liabilities of the taxpayers they represent.
The VAT Act does not permit the establishment of tax groups for VAT purposes.
Taxpayers file monthly VAT returns by the 25th of the month following the month in which the tax obligation arose, or quarterly, by the 25th of the month following the quarter in which the tax obligation arose. As a rule, VAT is paid to the tax office at the time of filing an appropriate VAT return. However, in the case of taxpayers paying VAT on a quarterly basis, monthly VAT withholdings must be made if the tax due results from the return filed for the previous quarter. Taxpayers with annual sales of less than 1,200,000.00 EUR are not required to make monthly withholdings (VAT paid quarterly).
Taxpayers conducting intra-community transactions and providing services (for which the place of provision is determined in accordance with general principles) to EU taxpayers are required to file monthly recapitulative statements. Quarterly recapitulative statements may be filed by taxpayers who do not exceed certain value thresholds in commodity transactions and taxpayers providing services solely to EU taxpayers. Furthermore, taxpayers are required to file statistical information (INTRASTAT) on intra-community commodity transactions.
In the case of transactions between related parties, tax authorities may assess turnover on the basis of the market value if it turns out that the relationship affected the calculation of the compensation 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 turnover 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 voting rights that represent at least 5% of all voting rights, or disposes of such rights directly or indirectly.