You have set up a company and are wondering if you have to account for VAT at the tax office since the first day? Not always. Below there is an explanation of when your company may be eligible for a VAT exemption. The legislation defines situations in which VAT registration is required and situations in which you do not have to register.
VAT exemptions can be divided into two groups: those which are subject to VAT in terms of sales volumes and those which are subject to VAT in terms of specific products and services.
Exemption from the first group
If you run a company:
- you do not need to register as a VAT payer if you do not exceed the sales limit of PLN 200,000 during the year
If you're starting out during a tax year:
- you do not need to register for VAT if the expected value of your company's sales does not exceed, in proportion to the period of sale, an amount corresponding to the equivalent of 200,000 Proportion:
- you calculate by multiplying the number of days from the start of the sale until the end of the year by the applicable VAT limit
- then dividing the figure obtained by the number of days in the year in question
That means, for example, if you set up a company on 2 May 2018. (i.e. by the end of the year there were 244 days left) the calculation will look as follows
(200,000x244)/365 = PLN 133,698.63
Before the sale, after which you exceed the limit, you should register as a VAT payer.
Important! The sales limit does not include the amount of tax and:
- intra-Community supply of goods and mail order sales;
- the sale of goods and services which are exempt from tax under the VAT Act or a regulation, with the exception of
- transactions relating to immovable property
- certain services, e.g. credit or loans and intermediation services, guarantee, guarantee and other security services for financial and insurance transactions, money deposit services
- insurance services, where these activities are not of a transactional or ancillary nature
- sale of goods which are classified as fixed assets and intangible assets subject to depreciation
When the subjective exemption from VAT does not apply, even if I did not exceed the threshold of PLN 200,000
The exemption from subjective VAT (i.e. the limit of PLN 200,000) does not apply if, inter alia,
- goods listed in Annex 12 to the VAT Act (including precious metals and scrap thereof, jewellery)
- goods subject to excise duty (except electricity, tobacco and passenger cars)
- in certain cases: buildings, structures or parts thereof
- building sites
- new transport vehicles
you provide services:
- legal advisory services, with the exception of agricultural services relating to the cultivation and breeding of plants and the rearing and breeding of animals, and services relating to the drawing up of a management plan and the modernisation of an agricultural holding
you do not have a registered office in Poland
In such a case, you must settle VAT even if you do not exceed PLN 200,000 of the sales limit.
The VAT exemption in question
The rules also define a group of goods and services which are excluded from VAT. This applies, for example, to healthcare services, the supply of undeveloped land other than for construction purposes, the management of investment or pension funds (for a full list, see Article 43 of the VAT Act).
If you are not required to pay VAT (you are exempt), you can settle VAT voluntarily - i.e. you can opt out of the VAT exemption.
If you are already registered for VAT, you must notify the tax office before the beginning of the period (month or quarter) in which you opt out. If you are just starting the activity, you must give notice before you can do your first taxed activity.
You also need to update the data on the VAT-R form.
Obligations of a taxable person who is exempt from VAT
Exempt status means that you do not have to submit VAT returns (e.g. VAT-7 or VAT-7K). So you do not settle the sales tax at the tax office and you do not have the right to deduct (refund) the input tax. You are required to keep simplified sales records.
Records of the taxable person exempt from VAT
If you take advantage of the exemption (turnover limit up to PLN 200,000), you do not need to keep full records of VAT sales and purchases. You are required to keep simplified sales records. The sales register gives you an idea of when you exceed the VAT exemption threshold (before the sale where you exceed it, you must register for VAT).
Simplified records do not have a prescribed model. You should include sales for the day in question, but no later than before the start of the sale the following day.
The records may contain information such as:
- the date of the sale
- the value of sales
- value of sales cumulatively
The sales register gives you an idea of when you are going to exceed the VAT exemption threshold.
Keep accurate records - if, despite your obligation, you do not keep records or you do so unreliably, the tax authorities will estimate the sale and you will have to pay tax on it.
VAT obligation on trade with EU countries
If you intend to do business with foreign contractors from EU countries, you must register as a VAT-EU taxpayer. Even if you are not obliged to register as an active VAT taxpayer, but you make an intra-Community acquisition of goods (WNT), i.e. you buy goods from an EU company and the total value of these transactions exceeds PLN 50,000 during the tax year, you are obliged to account for VAT on these transactions (despite the fact that there is no obligation to settle VAT in respect of other business activities).
The obligation to register EU VAT (irrespective of the VAT exemption) also applies to:
- the purchase of services from contracting parties in the EU for which the place of performance is in the purchaser's country
- intra-Community supply of services for which the place of taxation of the transaction is in the country of the person acquiring the goods
Important! If you are exempt from VAT and register as a VAT-EU taxable person, you do not lose the right to be exempt from VAT.
What should I do if I have exceeded my VAT exemption limit?
After exceeding the limit of PLN 200,000 each subsequent sale is subject to VAT. The VAT exemption ceases to apply and you should register as a VAT payer.
If you first register as an exempt VAT taxpayer and then:
- you lose the right to continue using the exemption (you will exceed the sales limit)
- you want to opt-out
- you intend to make taxable sales (other goods or services that are not exempt from VAT)
you must update the status on the VAT-R form with the "data update" box checked. :
- before the date of first sale of goods or services other than exempt
- before the day on which you lose the right to exemption, i.e. before the amount of PLN 200,000 net turnover is exceeded
- before the beginning of the month or the beginning of the activity - if you resign from your exemption
If you take advantage of the turnover exemption, you are not entitled to deduct VAT on your purchases. VAT paid by you on the purchase of goods and services (related to the activity) is then your cost in the income tax - if the form of taxation chosen by you allows it.
If you voluntarily opt out of the VAT exemption or lose it as a result of exceeding the turnover limit, you can again take advantage of the exemption no sooner than one year after (counting from the end of the year in which you lost the right to the exemption or resigned from it).