How to account for VAT correctly

Monthly and quarterly accounting

Depending on the chosen accounting period, VAT payers submit the following JPK files:

• JPK_V7 – if they account for VAT on a monthly basis
• JPK_V7K – if they account for VAT on a quarterly basis

Please note! Effective from 1 October 2020, taxpayers submit JPK files together with their VAT return. Submit a JPK_V7 file to the tax office if you account for VAT on a monthly basis or a JPK_V7K file if you account for VAT on a quarterly basis.

As a rule, you account for VAT on a monthly basis.

Small VAT payers whose turnover did not exceed EUR 2 million in the previous year may (but do not have to) choose to account for VAT on a quarterly basis.

Please note! The limit of EUR 2 million applies from 1 July 2023. Until that date, the limit was EUR 1.2 million.

The following small VAT payers may not account for VAT on a quarterly basis:

• active VAT payers for less than 12 months
• in the quarter in question, or in the four quarters preceding it, the VAT payers have supplied the goods listed in Annex 15 to the VAT Act – these are so-called sensitive goods, such as steel products, fuels, precious metals, digital cameras, HDDs, SDDs, stretch films, and their total value exceeded in any month the amount of PLN 50,000 exclusive of VAT
• in the quarter in question, the VAT payers imported goods in accordance with the rules set out in Article 33a(1) of the VAT Act – a taxpayer registered as an active VAT payer may settle the amount of output tax on the importation of goods in a tax return submitted for the period in which the tax obligation on the importation of these goods arose
• the VAT payers do not, contrary to the obligation, ensure that it is possible to make payments using a payment instrument, wherever business is actually carried on. Such VAT payers will have to file returns on a monthly basis starting with the settlement for the first month:
• o of the quarter in which the irregularity was identified if this occurred in the first or second month of the quarter, or
• o following the quarter in which the irregularity was identified if this occurred in the third month of the quarter.

VAT payers who wish to account for VAT on a quarterly basis should submit a written notification to the head of the competent tax office no later than on the 25th day of the second month of the quarter for which the tax return will be filed for the first time.

Deadlines for filing returns and paying tax

You must file a return and pay the resulting tax

• in the case of monthly settlements, by the 25th day of the following month, for example, by 25 June for May and 25 July for June.
• in the case of quarterly settlements, by the 25th day of the month following each consecutive quarter (25 April, 25 July, 25 October, 25 January).

If the day of submission of the VAT return falls on a Saturday, Sunday or public holiday, the deadline for settlement is postponed to the next working day.

The VAT payer is charged with interest for each day of delay in paying the VAT shown in the tax return. Currently, the base rate of interest is 8% per annum. If the amount of interest does not exceed PLN 8.70 (three times the fee charged by the Polish Post for registered mail), the entrepreneur does not have to pay it.

Read who must pay VAT.

VAT rates

You pay VAT at the following rates:

• 23% – this is the basic rate of value added tax
• 8% – this is a reduced rate which applies to, among others, construction covered by the social housing programme, services related to culture, sports, recreation
• 5% – this is a reduced rate which covers, among others, staple food (such as bread or dairy products), baby items, books and e-books
• 0% – this is a preferential rate which applies, among others, to intra-Community supply of goods and export of goods.

When applying the 0% rate, the seller does not pay tax, but is entitled to deduct VAT on the purchase of goods and services relating to the transaction.

If you are in doubt as to whether the VAT rate that you apply is correct, you can request that the tax administration should provide you with Binding Rate Information (BRI, WIS).

Read how to obtain Binding Rate Information.

Reduced VAT rates

Reduced VAT rates apply to certain goods and services.

Annex 3 to the VAT Act contains a list of goods and services taxed at a reduced rate of 8%.

The annex lists, among others:

• foodstuffs (such as coffee, confectionery not containing cocoa, sauces/gravies)
• goods normally used in agriculture (such as live trees, tubers, roots, seeds, grains, horticultural soil)
• goods related to health care (such as medical devices, medicinal products, disinfectants with bactericidal, fungicidal and virucidal properties)
• certain services (such as taxi services, veterinary services, hairdressing services).

In addition, the supply of buildings and residential units as well as certain construction services relating to them are taxed at the rate of 8%).

Annex 10 to the VAT Act contains a list of goods and services taxed at a reduced rate of 5%. The annex lists, among others:

• foodstuffs (such as meat, dairy products, vegetables, fruit, cereals)
• other goods (such as books, nappies, baby dummies).

Temporary reduction in VAT rates

From 1 February to 31 October 2022, VAT rates are temporarily reduced on the following goods:

• food from a rate of 5% to a rate of 0%
• fuels, such as diesel, biocomponents as self-contained fuels, motor gasoline, LPG – from a rate of 23% to a rate of 8%
• fertilisers, plant protection products, horticultural soil and other agricultural inputs from a rate of 8% to a rate of 0%
• natural gas from a rate of 8% to a rate of 0%
• electricity and heat from a rate of 23% to a rate of 5%.

From 1 January 2023 to 31 December 2023, a reduced VAT rate (from 5% to 0%) applies to staple food, such as meat, fish, dairy products, vegetables, fruit, flour and fats.

From 1 January 2023 to 31 December 2024, a reduced VAT rate of 8% applies to goods used in agricultural production, for example soil conditioners, growing substrates or soil improvers.

Returns of EU VAT payers

If you are a EU VAT payer and you perform intra-Community transactions, in addition to your VAT returns, you are obliged to submit, in electronic form, electronic EU VAT information.

The summary information concerning intra-Community transactions (EU VAT) must be submitted on a monthly basis, even if you account for VAT on a quarterly basis.

It can only be submitted by electronic means of communication, by the 25th day of the month following the month in which the tax obligation for these transactions arose.

How to correct VAT returns

If you have made an error in your VAT return (VAT-7, VAT-7K,VAT-UE,VAT-27, VAT-9M, VAT-8), you should correct it as soon as possible. You do this in the same form in which the return was submitted, by ticking the box: correction of the VAT return.

You may include the grounds for the correction on the ORD-ZU form, but this is not obligatory.

If, as a result of the correction, it turns out that the tax office has to return VAT to your bank account, the deadline for the return is calculated from the moment the correction is submitted.

If the correction shows an underpayment, you must pay the arrears with default interest. The interest is calculated from the original deadline on which the tax should have been paid until the date of actual payment.

The amount of interest payable is calculated according to the following formula: (amount in arrears x number of days in arrears x rate of interest on arrears) / 365.

Remember! The basic rate of interest is currently 8%.

You can apply a reduced rate of interest (50% of the basic rate) if you meet the following conditions together:

• you file a legally effective correction of the VAT return no later than 6 months after the expiry of the deadline for filing the return
• you pay the entire arrears within 7 days of filing the correction
• the correction has not been filed as a result of a received notification of the opening of a tax audit or pending tax proceedings or a tax audit

Example

Zbigniew corrected his VAT-7 return for April in August. The correction revealed that he was PLN 5,000 in arrears with his VAT. This amount should have been paid by 25 May, meaning that interest accrues from 26 May. Zbigniew paid it on 25 August, 92 days later. He benefited from a reduced interest rate of 4% as he meets all the conditions.
The amount of interest is PLN 50 (PLN 5,000 x 92 days x 0.04) / 365 = PLN 50.4. (The amount of less than 50 gr is omitted). Zbigniew will pay PLN 5,050 with interest.

Calculate the interest using the calculator of interest on tax arrears on the website of the Ministry of Finance.

Who must file a VAT return

The obligation to file a VAT return does not apply to the following entrepreneurs:

• entrepreneurs exempt from VAT due to the turnover or due to making only VAT-exempt sales (with the exception of situations where they are entitled to a tax refund, they are obliged to make a correction of previously deducted tax or are obliged to make a correction of tax resulting from the so-called bad debt relief)
• entrepreneurs who have suspended their business and do not carry out activities subject to VAT during this period.

A taxpayer who enjoys a complete exemption from VAT is obliged to file a VAT return if the total value of intra-Community acquisition of goods (WNT) within the territory of the country exceeded PLN 50,000 in the previous fiscal year. Such a taxpayer files:

• VAT-8 – a tax return for taxpayers other than active VAT taxpayers, registered as EU VAT payers, making intra-Community acquisitions of goods, or
• VAT-9M – a tax return for taxpayers not obliged to submit VAT-7, VAT-7K, VAT-7D or VAT-8 returns, importing services or acquiring goods and services for which they are taxpayers

An exempt taxpayer, once the WNT threshold of PLN 50 000 is exceeded, is obliged to register for EU VAT and file a VAT-8 return and an EU VAT summary return. However, once an EU VAT registration is made, the taxpayer does not become an active VAT payer (they are entered in the database of entrepreneurs performing intra-Community transactions).

A taxpayer who has suspended their business submits VAT returns in the event of:

• making an intra-Community acquisition of goods
• importing services or acquiring goods – for which they are a taxpayer
• the suspension not concerning a full accounting period
• accounting periods for which they are obliged to account for tax on taxable activities or to file a correction

Read how to register for EU VAT.

How to pay VAT

The competent office for the submission of the JPK_V7 and JPK_V7K files is:

• for natural persons (e.g. one-person businesses/sole traders), the tax office competent for the taxpayer’s address of residence (hence the same as for income tax)
• for persons other than natural persons (for example, limited liability companies, Civil Code partnerships), the tax office competent for the address of the company’s registered office.

Pay your tax liabilities into your individual micro-account.

Read more about the micro-account.

As a rule, the amount of tax is paid by bank transfer. This refers to entrepreneurs obliged to keep an accounting book or a tax revenue and expense ledger.

When payment is made by transfer order, the date of payment of the tax is deemed to be the date on which the taxpayer’s account is debited at the bank, at the cooperative savings and credit union or at another payment institution.

Micro-entrepreneurs can pay tax in cash.

A micro-entrepreneur is an entrepreneur who in at least one of the last two financial years:

• employed fewer than 10 employees on average per year, and
• achieved an annual net turnover of less than the equivalent of EUR 2 million, or the total assets of its annual balance sheet did not exceed the equivalent of EUR 2 million.

When to use the split payment mechanism

You must use the split payment mechanism (SPM) in the settlements with your business partners if you meet the following three conditions altogether:

• total payables under the invoice (gross value of the entire invoice) exceed PLN 15,000
• even one item on the invoice concerns sensitive goods or services (as defined in Annex 15 to the VAT Act)
• the seller and the purchaser are both VAT payers.

If you are a purchaser and you receive a VAT invoice with the note “split payment mechanism”, you must pay the resulting amount in SPM (this applies to payables for the acquisition of goods or services subject to mandatory SPM). Once the transfer is made in SPM, the VAT from the invoice will go into the seller’s VAT account.

In the transfer message the purchaser indicates:

• the amount of VAT (or part thereof)
• gross sales amount (or part thereof)
• the number of the invoice in respect of which payment is made
• the supplier’s tax identification number (NIP).

If you sell goods subject to compulsory SPM, include the note “split payment mechanism” on the invoice. When your business partner pays in SPM , the VAT from the invoice will go into your VAT account.

Read more about the split payment mechanism.

What are mixed sales and how to account for them

You can only deduct VAT on purchases in respect of taxable activities (purchases that are related to taxable sales).

If you engage in so-called mixed sales, you should divide your business expenses into:

• purchases related to exempt sales only – VAT cannot be accounted for in the case of such purchases
• purchases related to taxable sales only – standard VAT can be accounted for
• purchases that can be used for both types of sales – they cannot be unambiguously attributed to taxable or exempt business activity.

If the amounts related to taxable and non-taxable sales cannot be separated, you must calculate a ratio: divide the annual turnover from taxable activities by the annual total turnover (taxable as well as exempt business activity). You determine these values based on the previous year’s data.

Example

In the previous fiscal year, Zbigniew obtained PLN 20,000 from the sale of VAT-exempt services and PLN 30,000 from the sale of taxable services. Therefore, the calculated ratio is as follows: 30,000 / 50,000 = 0.6. Zbigniew can deduct 60% of the VAT related to purchases for mixed sales purposes.

If you are just starting a business, set a ratio based on your own estimate. The coefficient to be used should be agreed with the tax office.

After the end of the fiscal year, you may find that the actual ratio is different from the one that you used in your VAT return (i.e. calculated for the previous year). You should calculate the sales according to the actual ratio and make a correction of the input tax.

Please note! Effective from ratio correction for 2023, a taxpayer does not have to adjust the deducted VAT to the actual coefficient, as long as the difference between the preliminary ratio and the actual correction does not exceed two percentage points. At the same time, when the actual ratio is lower than the preliminary ratio, the taxpayer will not be obliged to submit a correction, as long as the resulting amount does not exceed PLN 10,000, excluding the correction of fixed assets and intangible assets whose initial value does not exceed PLN 15,000.

The correction is made once in the VAT-7/VAT-7K return for the first month of the year or the first quarter (for taxpayers accounting for VAT on a quarterly basis).

Assistance in accounting for VAT

Remember that in complex cases as regards accounting for VAT you can seek assistance.

National Revenue Information (Krajowa Informacja Skarbowa, KIS)

Helpline of the National Revenue Information provides detailed information on VAT.

• from a landline: 801 055 055
• from a mobile phone: (22) 330 0330
• from abroad: +48 22 330 0330

The helpline is open Monday to Friday from 7.00 a.m. to 6.00 p.m.

Tax rulings

In complex cases, you can ask for a tax ruling.

Read how to file a request for a tax ruling or check the database of tax rulings.

Websites of the Ministry of Finance

Useful information about VAT can be found on the website of the Ministry of Finance. On the e-Deklaracje website you will find tools for sending VAT returns and the necessary forms.