Warsaw GMT +1
EY
Rondo ONZ 1 00-124 Warsaw Poland
Indirect tax contacts
Dorota Pokrop
+48 (22) 557-7339 dorota.pokrop@pl.ey.com
Sławomir Czajka +48 789 407 593 slawomir.czajka@pl.ey.com
Tomasz Wagner +48 519 511 502 tomasz.wagner@pl.ey.com
Anna Jankowska +48 789 407 598 anna.jankowska1@pl.ey.com
Tomasz Dziadura +48 513 135 612 tomasz.dziadura@pl.ey.com
Patrycja Ozdowska-Sitek +48 797 305 788 patrycja.ozdowska-sitek@pl.ey.com
A. At a glance
Name of the tax Value-added tax (VAT)
Local name Podatek od towarow i uslug
Date introduced 5 July 1993
Trading bloc membership European Union (EU)
Administered by Ministry of Finance (http://www.mf.gov.pl)
VAT rates
Standard 23%
Reduced 5%, 8%
Other Zero-rated (0%) and exempt
VAT number format 123-45-67-890
PL 1234567890 (intra-Community transactions)
VAT return periods Monthly or quarterly Thresholds
Registration
Established
PLN200,000 (approx. EUR43,800)
Non-established None Distance selling
Intra-Community acquisitions
Electronically supplied services
PLN42,000 (EUR10,000)
PLN50,000 (approx. EUR10,900)
PLN42,000 (EUR10,000)
Recovery of VAT by non-established businesses Yes
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods and rendering of services in Poland for consideration
• Receipt of reverse-charge services by a taxable person in Poland
• Export and import of goods
• Intra-Community acquisitions of goods from another European Union (EU) Member State by a taxable person (see the chapter on the EU)
• Intra-Community supply of goods
The following activities are outside the scope of VAT:
• Transactions that cannot be subject to legal agreements (illegal transactions)
• Sales of businesses (transfers of going concerns or part thereof)
Quick Fixes. Pending introduction of a “definitive” system for the VAT treatment of intra-Com munity supplies of goods to taxable persons, the EU has adopted Quick Fixes for intra-Community trade in goods. For an overview of the Quick Fixes rules, see the chapter on the EU.
The Quick Fixes were implemented to the Polish VAT Act on 1 July 2020 and concerned chang es in four main areas:
• Call-off stock arrangements (so far, there were regulations on the “consignment store,” but these were replaced with EU provisions on the simplified call-off stock regulations)
• Chain transactions (i.e., introducing the general rule of transport allocation based on the intermediary role)
• Conditions for 0% VAT rate in intra-EU supplies (including an absolute requirement for apply ing 0% VAT rate of providing a valid VAT number by the buyer and submitting the EC Sales and Purchases List)
• Documentary evidence of proof of intra-EU supplies
Effective use and enjoyment. To avoid instances of nontaxation or double taxation, EU Member States can apply use and enjoyment rules that allow a service that is “used and enjoyed” in the EU to be taxed or prevent a service that is “used and enjoyed” outside the EU from being taxed. If a service is taxed in the EU under the use and enjoyment provisions, a non-EU supplier of the service may be required to register for VAT in every Member State where it has customers that are not taxable persons. For the information regarding the rules relating to VAT registration, see the chapters on the respective countries of the EU.
In Poland, generally no services are subject to the “use and enjoyment” provisions. However, there is a general regulation that VAT is due locally due to the place of supply rules to the fol lowing services type (provided certain conditions are met):
• Land and properties services
• Hires of means of transport
• Events
• Ancillary transport services, valuation of and work on goods
• Restaurant and catering
• Passenger and freight transport
• Intermediary services
Transfer of a going concern. A transfer of going concern (TOGC) is understood as the sale of enterprise or an organized part of enterprise (OPE), which is outside the scope of VAT.
OPE is defined as the set of tangible and intangible components organizationally and financially separated from the existing company, including liabilities, intended for fulfillment the specific economic tasks, which could be treated as an independent entity and could run a business on its own.
C. Who is liable
A taxable person is a business entity or individual that carries on business activities, regardless of the purpose or result of the business activities. Business activities include all manufacturing, trading and service-providing activities. Business activities also include continuous use of goods and intangible rights with the purpose of obtaining income.
The VAT registration threshold is PLN200,000. The limit may apply in one of the following two ways:
• Retrospectively: the value of supplies of goods or services exceeded PLN200,000 in the preceding tax year.
• Prospectively: at the start of business, the value of supplies of goods or services is expected to exceed PLN200,000. If the business begins after the start of the calendar year, the registration limit applies proportionately to the remainder of the year.
If the value of supplies is not expected to exceed the registration threshold, a new business is exempt from VAT (with some exceptions — please see below).
A taxable person may choose to register for VAT. This decision must be reported to the tax office before the first taxable transaction is made when the taxable person starts its activities or before the beginning of the month from which the taxable person chooses to register for VAT. Moreover, taxable persons who perform activities exclusively exempt from VAT do not have to register for VAT (registration is facultative).
Taxable persons who lose the right to be exempt from registration can benefit from the exemption no earlier than one year after they lose the right to be exempt. However, it may waive the exemp tion. The waiver in writing must be submitted to the appropriate VAT office. If the value of sales exceeds the registration threshold, the exemption is automatically no longer valid and the amount of turnover greater than the threshold is subject to VAT.
The registration threshold is not applied to the importation of goods and services, to intraCommunity acquisition of goods and the supply of goods on which the purchaser is liable to account for VAT. In addition, businesses in the following categories must register for VAT at the commencement of activity, regardless of the amount of turnover:
• Businesses that supply products made from precious metals
• Businesses that supply certain excise products
• Businesses that supply new means of transport
• Businesses that supply buildings or building land
• Businesses that provide legal, consulting and professional services
• Businesses that supply services connected with jewelry
The PLN200,000 registration threshold does not apply to foreign businesses.
Exemption from registration. Foreign businesses (i.e., entities that are not based or that do not have a place of business in Poland) that supply certain services in Poland are not obliged to reg ister for Polish VAT. This exemption is for businesses that supply:
• Services and goods where the Polish purchaser accounts for and pays tax under the reversecharge mechanism
• Certain services that are subject to a zero rate (e.g., services supplied within Polish seaports, connected with international transport, services of air traffic control rendered for foreign pro viders of air transportation)
Generally, the recipient of goods and services supplied by foreign business is obliged to account for VAT under the reverse-charge mechanism (with some exceptions). However, the reversecharge mechanism cannot be applied if a supplier of goods is registered for VAT in Poland.
Foreign businesses providing intra-EU distance sales of goods are obliged to register for VAT purposes in Poland if they are not reporting these sales under the One-Stop-Shop scheme (OSS) and if the value of their goods sold in Poland exceeded in the previous year EUR10,000 (or its equivalent of PLN42,000).
Voluntary registration and small businesses. Generally, each taxable person may opt for VAT registration in Poland regardless of PLN200,000 threshold. Taxable persons performing only exempt activities may opt for the VAT registration as well. There are no restrictions in this regard in Polish VAT law.
Group registration. Group VAT registration is allowed in Poland from 1 July 2022. VAT groups may be created by taxable persons connected financially, organizationally and economically (this condition shall be in force within the entire period of VAT group existence).
To set up the VAT group, the taxable persons are obliged to conclude an agreement on VAT group indicating at least:
• Name of the VAT group with marking “VAT group” or “GV”
• Identification data of the taxable persons forming the VAT group
• Identification of the representative of the VAT group
• Identification of shareholders with the amount of their participation in the share capital of the taxable person within the VAT group with more than 50% in the share capital of these taxable persons
The minimum time period required for the duration of a VAT group is three years.
All members of a VAT group in Poland are jointly and severally liable for VAT debts and penalties.
Holding companies. In Poland, a pure holding company cannot be a member of a VAT group.
Cost-sharing exemption. The VAT cost-sharing exemption (in accordance with VAT Directive 2006/112/EEC Article 132(1)f) has been implemented in Poland. This provides an option to exempt support services that the cost-sharing group supplies to its members, providing certain conditions are met (in accordance with specific requirements laid out in Polish VAT law, implemented in 2011 to the Polish VAT Act in Article 43(1)21).
Fixed establishment. There is no definition of fixed establishment (FE) in the Polish VAT Act, and as such this term is interpreted by the tax administration based on the law of the EU and further guideline of CJEU judgments (i.e., of 16 October 2014 in the C-605/12 Welmory case and of 7 May 2020 in C-547/18 Dong Yang Electronics case) as “any establishment, other than the place of establishment of a business characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs.”
Non-established businesses. A foreign business (that is, an entity that is not established in Poland and that does not have a place of business there) must register for VAT in Poland if it makes tax able supplies of goods or services in Poland.
However, in general, a foreign business is not required to register for VAT in Poland if it supplies exclusively the following services:
• Services and goods for which the Polish purchaser is required to account for and pay tax under the reverse-charge mechanism (see Section E).
• Certain services that are subject to a zero rate (for example, services supplied at Polish seaports with respect to international transport, services of air traffic control rendered for foreign pro viders of air transportation and transport services related to the import of goods if the cost of transport is included in the tax base of goods; see Section D).
Tax representatives. A non-EU business must appoint a Polish resident tax representative before registering for VAT in Poland (not applicable to entities established in Norway and the United Kingdom). The tax representative is jointly and severally responsible for the tax arrears of the foreign business represented by it.
An EU business is not required to appoint a tax representative to register for VAT in Poland, but it may appoint a tax representative if it chooses to do so.
Reverse charge. The reverse-charge mechanism is generally applicable to intra-Community acqui sitions of goods or import of services. Reverse charge is also applicable to supplies of services by foreign entities not having seat or fixed establishment in Poland to the Polish taxable persons and local supplies of goods by foreign entities not having seat or fixed establishment in Poland to the Polish taxable persons.
Domestic reverse charge. The domestic reverse charge has been replaced in Poland by the manda tory split payment mechanism. Certain regulations apply as regards the use of the split payment mechanism (SPM). The obligatory SPM is being used for the supply of goods and services listed in the VAT regulations that includes, i.e., the goods and services that were covered by the domestic reverse-charge mechanism and the existing scope of joint and several liability of the buyer (e.g., supply of construction services and fraud sensitive goods, such as ferro alloys, plastic waste, steel products, stretch foil, smartphones). See the subsection on Periodic payments below for more detail.
Digital economy. Specific VAT rules apply to cross-border supplies of goods and services sold via the internet (e-commerce) in all EU Member States with effect from 1 July 2021. These new rules apply to all direct sales to nontaxable persons (in practice these are mostly private individuals), but we refer to these rules as e-commerce VAT rules because most of these transactions are con ducted via the internet. In general, the place of supply is in the country of consumption, i.e., where the goods are shipped to or where the buyer of the goods or services resides, subject to any “use and enjoyment” provisions that may override this rule (see Section B, Effective use and enjoyment subsection above). Therefore:
• For supplies of services made by a nonresident supplier to a to a business customer (B2B), the business customer is responsible for accounting for the VAT due, using the reverse charge.
• For supplies of goods made by a nonresident supplier to a business customer (B2B), where the goods are transported from another EU Member State, the business purchasing the goods is responsible for accounting for the VAT due, as an intra-Community acquisition. If the goods come from outside the EU, the purchaser may have to report an importation of goods.
• For supplies of goods made by a nonresident supplier to a to a final consumer (B2C), the sup plier is generally responsible for charging and accounting for the VAT due at the rate applicable in the customer’s country (unless the supplier’s sales fall beneath the distance selling threshold of EUR10,000 with effect from 1 July 2021). This VAT can be reported using a single VAT registration, using a “One-Stop-Shop” mechanism.
For more details about intra-EU distance sales, please see the chapter on the EU.
Effective 1 July 2021, an e-commerce supplier may have a choice of how to account for VAT on its B2C supplies.
Local VAT registration. A nonresident supplier may choose to register for VAT in each Member State and account for VAT on all supplies made and recover input tax in accordance with local rules (see the Non-established businesses subsection above). Non-EU businesses may be required to appoint a fiscal representative for accounting for the VAT due on these transactions.
In Poland, the standard VAT registration procedure applies (see the subsection Registration pro cedures below).
One-Stop Shop. Effective 1 July 2021, a supplier can choose to account for the VAT due under the EU One-Stop Shop (OSS), which can be used for intra-EU cross-border supplies of goods and all cross-border supplies of services made to final consumers in the EU. Unlike the previous Mini One-Stop-Shop (MOSS) scheme that applied until 30 June 2021, the OSS is not limited to cross-border supplies of electronic services, telecommunication services and broadcasting ser vices.
The OSS is an electronic portal that allows businesses to:
• Register for VAT electronically in a single Member State for all intra-EU distance sales of goods and for B2C supplies of services
• Declare and pay VAT due on all supplies of goods and services in a single electronic quarterly return
The OSS can be used by businesses established in the EU and outside the EU. If a supplier or a deemed supplier decides to register for the OSS, it must declare and pay VAT for all supplies (goods as well as services) that fall under the OSS.
In Poland, where the Member State of identification is Poland, the taxable person is entitled to file a notification to II Urzad Skarbowy Warszawa Srodmiescie by electronic means. The tax authorities shall identify the taxable person for OSS and confirm the notification using the tax able person’s tax identification number. Such notification is published online at podatki.gov.pl in the section “Registration for the Union and non-Union scheme (OSS) and the import scheme (IOSS)” and can be only submitted electronically.
The forms for EU OSS procedure are as follows:
• VIU-R – notification form
• VIU-DO – form of the return for VAT settlements (filed for each quarter by the end of the month following a given quarter
The forms for non-EU OSS procedure are as follows:
• VIN-R – notification form
• VIN-DO – form of the return for VAT settlements (filed for each quarter by the end of the month following a given quarter)
For more details about the operation of the OSS, please see the chapter on the EU.
Import One-Stop Shop. Effective 1 July 2021, the Import One-Stop-Shop (IOSS) scheme applies for B2C distance sales of goods from outside the EU.
Effective 1 July 2021, VAT is due on all commercial goods imported into the EU regardless of their value. The actual supply is subject to VAT in the country where the goods are imported (the country of destination). The IOSS facilitates the declaration and payment of VAT due on the sale of low-value goods (i.e., consignments valued at less than EUR150 per consignment). It allows suppliers selling low-value goods dispatched or transported from a non-EU country to customers in the EU to collect, declare and pay the VAT due. If the IOSS is used, the importation into the EU is exempt from VAT.
In Poland, for the IOSS, the Member State of identification is Poland and it is applied by taxable persons not having a registered seat in the territory of EU and choosing Poland for IOSS.
The taxable person or the intermediary are entitled to file a notification II Urzad Skarbowy Warszawa Srodmiescie by electronic means. The forms for IOSS procedure are as follows:
• VII-R – notification form of taxable person
• VII-RP – notification form of intermediary
• VII-DO – form of the return for VAT settlements (filed for each month by the end of the month following a given month)
For more details about the IOSS, please see the chapter on the EU.
The use of the IOSS special scheme is not mandatory. If VAT is not collected via the IOSS scheme, the importation of goods into the EU is subject to import VAT in the country of final destination, and the Member State can decide freely who is liable to pay the import VAT, which could be the customer or the seller (or an electronic interface).
Postal Services and Couriers Scheme. If the IOSS is not used and the customer is liable for the import VAT due on the supply (and importation) of consignments with a small intrinsic value (i.e., less than EUR150), the VAT can be collected using the special scheme for postal services and couriers.
In Poland, the person responsible for the collection of tax (i.e., postal operator or a taxable person having status of an authorized economic operator) is obliged to file monthly returns with the sum of customs declarations containing the total amount of the tax collected in the month. The col lected tax is paid by the 16th day of the following month.
For more details about the special scheme for postal services and couriers, please see the chap ter on the EU.
Online marketplaces and platforms. Under the new EU VAT e-commerce rules, effective 1 July 2021, taxable persons that “facilitate” certain B2C sales of goods are deemed to have purchased and then supplied those goods themselves. This means that the single supply from the “underly ing” supplier to the final consumer is split into two deemed supplies:
• A supply from the supplier to the facilitator (deemed B2B supply)
• A supply from the facilitator to the final customer (deemed B2C supply). Any intermediation service provided by the facilitator is disregarded for VAT purposes
This provision does not cover all sales facilitated via the facilitator. It only covers distance sales of goods imported from non-EU jurisdictions in consignments with an intrinsic value not exceed ing EUR150. The jurisdiction of residence of the supplier using the facilitator is irrelevant. The supply to the facilitating platform is VAT exempt and the supplies made by that platform follow the e-commerce VAT rules as described above. In addition, the provision also covers sales within the EU, if the supplier is not established within the EU. This applies to both local ship ments within one Member State as well as intra-Community shipments (in Poland this is intraEU distance sales of goods). In both cases, the final customer must be a nontaxable person.
For more details about the rules for online marketplaces, please see the chapter on the EU.
Vouchers. As of 1 January 2019, the amendment to the Polish VAT Act introduced new definitions regarding vouchers, i.e., single-purpose voucher (SPV), multipurpose voucher (MPV), issue of voucher and voucher transfer.
The SPV shall be understood as a voucher where the place of supply of the goods or services to which the voucher relates, and the VAT due on those goods or services are known at the time of issue of the voucher.
In case of SPV, taxation occurs at the time of the transfer of it. The tax base for the sale of this type of vouchers is determined by applying the general rules for determining the tax base – it shall be the amount paid minus the VAT included in that amount.
Any other voucher shall be treated as MPV. The transfer of such a voucher will not result in taxation – VAT will be charged only when the goods or services covered by the MVP have been actually delivered.
The tax base on account of supply of goods or services made in exchange for an MPV redeemed in full shall, in relation to this voucher, be equal to:
• The consideration paid for this MPV less the tax amount related to the supplied goods or ser vices
• The monetary value indicated on the MPV or in the related documentation, less the amount of tax relating to the goods or services supplied – where the information concerning this consid eration is not available
Registration procedures. Prior to performing the first taxable activity, a taxable person should submit the forms for obtaining a tax number – NIP-2 (for foreign entities) or NIP-8 (for Polish established entities) and a form for obtaining VAT registration – the VAT-R. All forms should be signed and filed in paper. Documents should be signed by company’s representatives as per the representation rules (excerpt from commercial register should be presented to confirm the rep resentation). The deadline to issue a registration decision is two weeks, however, in most cases it takes less time. Additionally, prior to performing the first intra-Community acquisition or intraCommunity supply taxable persons should obtain VAT-EU number (VAT-R registration is also used for this purpose). Moreover, in case of any changes in scope of the information provided within the VAT-R form, a taxable person should update the tax office accordingly within seven days after the day the change has occurred.
Deregistration. Deregistration may be conducted either based on the taxable person’s application (filed on VAT-Z form) or officially by a Head of a Local Tax Authority Office (as per the jurisdiction for the particular taxable person).
The Head of a Local Tax Authority Office is entitled to deregister a taxable person from the register as a taxable person ex officio, for example, in cases where:
• The taxable person does not exist or despite documented attempts, there is no possibility of contacting that taxable person or its authorized representative.
• The data provided in the application for registration is revealed to be inaccurate.
• The taxable person or its authorized representative does not respond to summons of a tax authority.
• No VAT returns are filed for six months (or two quarters).
• No sales and purchases transactions appear in the VAT returns submitted for six subsequent months (or two quarters).
• The taxable person issues invoices that do not reflect actual actions.
Changes to VAT registration details. In case of any changes in scope of the information provided within the VAT-R/NIP-2/NIP-8 form, a taxable person should update the tax office accordingly within seven days after the day the change has occurred. All forms can be signed and submitted in paper. Electronic version is possible only if the company’s representative (signing the forms) possesses the qualified electronic signature. Failure to meet the deadline can result in the pen alty subject to Fiscal Penal Code.
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 23%
• Reduced rates: 5%, 8%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for a reduced rate, the zero rate or an exemption.
As of 1 April 2020, the goods subject to reduced VAT rates are determined based on:
• Combined Nomenclature (CN) for goods
• Polish Classification of Products and Services of 2015 in the field of services
Examples of goods and services taxable at 5%
• Certain unprocessed basic foodstuffs
• Certain agricultural and forestry products
• Books and certain magazines
• Electronic publications
Examples of goods and services taxable at 8%
• Catering and restaurant services – with the exception of drinks (other than water, coffee, tea), unprocessed foodstuffs and some seafood
• Handicraft products
• Books, newspapers and magazines
• Hotel services
• Certain entertainment services
• Passenger transport
• Travel services
• Medical products
• Supply of water
• Certain services related to agriculture
• Hard discs
• Certain maintenance services
• Other services related to recreation – solely within the scope of admission
• Supply, construction, repairs and reconstructions of buildings classified as “social housing”
Examples of goods and services taxable at 0%
• Exports
• Intra-Community supplies of goods
• Supplies of certain sailing vessels
• International transport and related services
• Supplies of computer equipment to educational institutions
The term “exempt” refers to supplies of goods and services that are not liable to tax and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Financial services (with exceptions)
• Supply of real estate (with option to tax)
• Health care services
• Social welfare services
• Public postal services
• Education
• Lease of residential property
• Cultural and sporting events (with exceptions)
• Services connected with science
• Dental engineering
• Betting, gaming and lotteries
Option to tax for exempt supplies. The Polish VAT Act provides option to tax for supply of real estate, which generally benefit from VAT exemption under certain conditions.
The option to tax financial services (only in B2B transactions and except for insurance services) is allowed in Poland from 1 January 2022. In general, the taxable person may opt to tax financial services provided that:
• It is an active taxable person
• It submits a written notification to the head of the tax office on choosing such option before beginning of the settlement period from which it ceases from exemption
The taxable person who waives the exemption is bound by its choice for a period of two years. After this period, the taxable person could apply the exemption again in transactions with other taxable persons.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” The basic time of supply for goods is when the goods are delivered. The basic time of supply for services is when the services are performed.
The tax point for exports of goods is created according to the general rules.
Deposits and prepayments. The receipt of prepayments is considered the tax point. The tax point is created only to the extent of the payment.
Continuous supplies of services. The tax point concerning continuous supplies of services (i.e., those services that are rendered for longer than a year) arises at the end of each year until these services are completed. If services are supplied for a period not exceeding a year – the tax point arises at the moment of services’ completion. Additionally, if parties of the transaction set clearing or payment periods regarding the continuously supplied services, the tax point arises at the end of each period.
Goods sent on approval for sale or return. There are no special time of supply rules in Poland for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).
Reverse-charge services. Imported services are subject to a reverse charge, which is a form of self-assessment of VAT. If the reverse charge applies, the recipient of the service accounts for output tax (effectively on behalf of the supplier).
The reverse-charge VAT is deductible as input tax by the recipient of the service (in accordance with the general input tax recovery rules), in the same month (quarter) when the tax point arises or in one of the two following months (quarters).
Leased assets. The tax point concerning leased assets arises at the moment of issuance of the invoice documenting leasing services.
Imported goods. The tax point for imported goods arises when a customs debt is incurred. However, for goods imported under certain customs regimes, the tax point arises when the goods enter the customs regime. The following are the relevant customs regime:
• Inward processing
• Temporary customs clearance
• Processing under customs supervision
Intra-Community acquisitions. The tax point for the intra-Community acquisition of goods is the invoice date but not later than the 15th day of the month following the month in which the supply took place. If an invoice is issued before this date, the VAT is due at the time the invoice is issued.
Intra-Community supplies of goods. The same tax point rules apply to intra-Community supplies of goods as those for intra-Community acquisitions (as outlined above).
Distance sales. There are no special time of supply rules in Poland for supplies of distance sales. As such, the general time of supply rules apply (as outlined above).
F. Recovery of VAT by taxable persons
A taxable person may recover input tax, which is charged on goods and services supplied to it for business purposes, if it relates to the person’s taxable supplies. A taxable person generally recovers input tax by deducting it from output tax, which is charged on supplies made.
Input tax includes VAT paid on the purchase of goods and services, VAT paid on imports of goods and on intra-Community acquisitions, VAT self-assessed for reverse-charge services received from outside Poland and VAT self-assessed for goods on which the purchaser is liable to account for VAT.
The amount of the VAT reclaimed must be detailed on a valid VAT invoice.
In general, input tax is deducted at the time the tax point arose, but for local purchases and import of goods, it cannot be recovered earlier than in the month in which the invoice/customs document is received or during three subsequent periods. For other purchases (intra-Community acquisi tions, VAT self-assessed for reverse-charge services received from outside Poland and VAT selfassessed for goods where the purchaser is liable to account for VAT), it cannot be recovered earlier than in the month in which the output tax was reported.
The time limit for a taxable person to reclaim input tax in Poland is five years. A taxable person has five years to reclaim VAT (counting from the beginning of the year in which the right to recover arose).
Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by the entrepreneur). In addition, input tax is not recoverable for some items of business expenditure.
Examples of items for which input tax is nondeductible
• Restaurant meals
• Personal expenses
• Hotel accommodation
Examples of items for which input tax is deductible (if related to a taxable business use)
• Advertising
• Purchase, lease or hire of passenger cars as well as vans or trucks with high loading capacity
• Fuel (gasoline, diesel oil, propane and butane) for the vehicles listed above
• For passenger cars with low loading capacity (if passenger car is used for taxable activities only, under certain conditions 100% of input tax is deductible, otherwise, i.e., if a passenger car is used for both taxable activities and private purposes – only 50%)
• Travel
• Conferences
• Business gifts
• Advisory services
• Business use of home telephone and mobile phones
Partial exemption. Input tax is not recoverable if it is directly related to making exempt supplies. If a Polish taxable person makes both exempt supplies and taxable supplies, it may not deduct input tax in full. This situation is referred to as “partial exemption.”
Input tax directly relating to taxable supplies is recoverable in full, while input tax directly related to exempt supplies is not recoverable. Input tax that is not directly attributable to taxable supplies or to exempt supplies must be apportioned to each category.
The general pro rata method is based on the ratio of qualifying turnover compared with total turnover during the calendar year. The initial deduction (that is, the deduction made during a tax year) is done based on the pro rata percentage for the preceding year.
The recovery percentage is rounded up to the nearest whole number. The calculation is adjusted using the actual figures for the year in the first period of the next calendar year.
Approval from the tax authorities is not required to use the partial exemption standard method in Poland. Special methods are not allowed in Poland.
Capital goods. Capital goods are items of capital expenditure that are used in a business for longer than a year. Input tax is deducted in the tax period in which the goods are acquired. The amount of input tax recovered depends on the taxable person’s partial exemption status in the VAT year of acquisition. The amount of input tax recovered on the capital item must be adjusted over time depending on the use of the goods. In Poland, the capital goods adjustment applies to the follow ing assets (for the number of years indicated):
• Real estate: adjusted for a period of 10 years
• Capital goods and intangible assets (the transfer of which is considered as a service), adjusted for a period of five years
The adjustment does not apply to goods or services that are capital goods and intangible assets with a purchase value of less than PLN15,000.
The adjustment is applied each year following the year in which the capital goods or real estate is made available to a fraction of the total input tax (1/10 for real estate and 1/5 for other capital goods). The adjustment may result in either an increase or a decrease in deductible input tax, depending on whether the ratio of taxable supplies made by the business has increased or decreased compared to the year in which the capital goods were acquired.
Refunds. In general, if a VAT return shows an excess of input tax over output tax, the surplus input tax is carried forward to offset output tax in the following month. Taxable persons may request a direct refund of the surplus within the following time limits:
• 60 days after the date on which the VAT return is submitted
• 180 days from the date on which the VAT return was submitted if the taxable person did not perform any taxable activity in the relevant period
The refund periods may be shortened to 25 and 60 days, respectively, if the taxable person sub mits an appropriate application and if the invoices and other documents regarding the input tax shown in the VAT return are paid or if the collateral is submitted.
Refund in 25 days is possible provided that: payment of invoices occurred from a bank account of the taxable person and submitted to confirm transfers in the tax office; the taxable person is not in arrears with taxes more than PLN20,000 and timely settles taxes for at least two years; subject is registered for VAT at least 12 months and it has not been transferred from the previous VAT declarations amount higher than PLN3,000.
If necessary, the tax office may extend the refund period until tax proceedings are completed.
If a repayment is delayed, the tax office must add interest for the delay.
Alternatively, a refund in 25 days is possible if the taxable person applies for the refund to be made to its own VAT bank account (used for the split payment mechanism).
At the time of preparing this chapter, the introduction of the VAT refund for a noncash taxable persons is expected to be introduced. In general, the VAT refund could be obtained within 15 days, provided that the excess of input tax does not exceed PLN3,000.
Pre-registration costs. It is possible to deduct input tax from expenses incurred prior to VAT registration under certain conditions. The Polish tax authorities allow such deductions, yet such procedure is not regulated within the Polish VAT Act.
In practice, the taxable person should in such cases make a retrospective VAT registration and submit past returns – where the first VAT return is for the month in which the taxable person received the first purchase invoices for expenses incurred. The VAT deduction is possible only if the costs incurred are directly related to the commencement of taxable activities in Poland (e.g., costs for the VAT registration process, notary costs for signing the company agreement, etc., and the taxable person must be ready to present the explanations and proofs if the tax authorities request).
Bad debts. Under certain conditions, a taxable person may adjust a taxable amount and the tax due on goods or services supplied in the case of receivables that cannot be collected has been substantiated. The adjustment also concerns the taxable amount and tax amount attributable to a portion of receivables that cannot be collected and has been substantiated. Receivables that can not be collected are deemed as substantiated if receivables were not settled or disposed of in any form within 90 days following the lapse of their payment deadline stipulated in an agreement or invoice. On the other hand, if the amount due on the invoice for goods or services supplied is not paid within 90 days from the lapse of payment deadline specified in an agreement or the invoice, a debtor shall adjust a deducted amount of the tax resulting from said invoice in settlement for the period in which the 90th day elapsed from the payment deadline specified in the agreement or the invoice (unless creditor is at that moment in the bankruptcy or liquidation proceedings).
The deadline for bad debt relief is three years starting from the end of the year in which the invoice was issued.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Poland.