Understanding Poland’s VAT System. A Comprehensive Guide for Foreign Entrepreneurs

A Comprehensive Guide for Foreign Entrepreneurs:
How to understand Poland’s VAT System?

Poland, situated at the crossroads of Europe, is an attractive destination for foreign entrepreneurs looking to tap into the European market. With its strong economy and strategic location, it’s no surprise that many businesses choose to expand their operations into Poland. However, one crucial aspect that foreign entrepreneurs need to navigate is Poland’s Value Added Tax (VAT) system. In this comprehensive guide, we will break down the intricacies of the Polish VAT system to help you understand and comply with it effectively.

What is VAT?

Value Added Tax (VAT) is a public tax constituting an indirect tax. This means that VAT is not paid directly to tax office, but at the time of purchase of the property. Moreover, it is multi-phase, i.e. it is collected in each phase of trading, and therefore ultimately burdens the end user.

Polish VAT Rates

The basic VAT rate in Poland is 23%, however, the regulations also allow for reduced VAT tax rates. Therefore, the seller has the right to apply VAT rates like:

• 8% rate applicable to selected goods and services like gardening soil, books, newspapers, pictures and other printed products of the printing industry, as well as for construction, delivery, renovation, modernization and thermal modernization, as well as reconstruction of facilities construction or parts thereof, if they are included in the construction covered by the social housing program.
• 5% rate for goods like most food products and pacifiers for babies and children as well as disks, tapes, semiconductor permanent memory devices.
• 0% applies to WDT (intra-Community supply of goods) and export of goods, as well as to goods listed in the annex to the Act and in special cases,
• conv. is not mentioned directly in the Act but is used in the case of the sale of goods or services that benefit from VAT exemption.

Registration for VAT

If you plan to operate a business in Poland, you may be required to register for VAT. Registration for goods and services tax applies to natural persons, legal persons, organizational units without legal personality, independently conducting business activities as producers, traders, service providers, including entities extracting natural resources and farmers.

You are obliged to register as a VAT payer if: the value of your sales in the previous year exceeded PLN 200,000 and you sell goods or services listed in the VAT Act.

Invoicing and Documentation

Proper documentation and record-keeping are crucial in Poland’s VAT system. When invoicing, you must include specific information on the invoice, such as the seller’s and buyer’s VAT numbers, a description of the goods or services, and the applicable VAT rate. It’s essential to keep these records for a specified period.

VAT Deduction in Poland

One significant benefit of VAT registration is the ability to deduct input VAT from the VAT collected on your sales. This can help reduce your overall VAT liability. Keep in mind that you can only deduct VAT that is directly related to your business activities.

Summary

Understanding and complying with Poland’s VAT system can be a complex endeavor, especially for foreign entrepreneurs. Seeking professional assistance, such as a local tax advisor or an accounting firm with expertise in international tax matters, is highly recommended. GLC can help you navigate the intricacies of the VAT system, ensure compliance, and optimize your tax position.

Photo by Kelly Sikkema on Unsplash