The advantages and disadvantages of having the status of VAT taxpayer

When being a taxable person registered for VAT is mandatory

Provisions in most cases enable entrepreneurs commencing economic activity to take a decision on whether or not to become VAT payer.

VAT Act specifies the types of activities and the value of sales, which require you, as an entrepreneur to register as a taxable person for VAT (Article 113 of the VAT Act).

Types of activities

This concerns, inter alia, the taxable persons who carry out supplies of articles of precious metal, of excisable goods (with some exceptions), new means of transport, construction sites and designated for development, providing legal services and advisory services, and also services of jewellery and non-established taxable persons in Poland. If you intend to carry out activities in one of the above areas, you must register for VAT as an active taxable person.

Value of sales

If you conduct business to a lesser extent, there is a subjective exemption. The following shall be exempt from tax  - the sale made by taxable persons whose total sales in the previous tax year did not exceed the PLN 150 000. The value of the sales shall not include the amount of tax. This means in practice that, beyond the limit of PLN 150 000 each subsequent sale made by the entrepreneur is taxable, i.e. exceeding indicated limit results in obligation to register as a VAT taxable person.

What are the advantages and disadvantages of registration as a VAT payer

As an entrepreneur, you need to individually examine what are pros and cons of the registration as a VAT payer in the case of your business activity. The choice must be thought out and importantly - ultimately viable.


Advantages:

  • status of vat-payer is an asset in business relations, if our counterparts are also subject to VAT, they will be able to deduct the VAT charged on goods or services purchased from you,
  • facilitated cooperation with firms (e.g. participation in tenders, lower commodity prices, essential is the actual cost of services on a net basis),
  • the possibility of reducing input tax (from sales) by output tax (on purchases related to the activities carried out).

Disadvantages:

  • compliance with VAT obligations — the need to complete a series of formalities (e.g. submitting VAT returns to the tax office, the VAT records),
  • ensuring the accuracy of the accounts with the Tax Office (in case of an incorrect record keeping the tax office may challenge the right to deduct VAT, this entails the need to pay the amount of wrongly deducted tax with interest),
  • essential is knowledge of the provisions of the Act on the tax on goods and services (and ongoing monitoring of changes).

Registration — VAT registration

The entrepreneur shall carry out the registration before the first taxed sales by submitting the registration form VAT-R to the tax office. The Head of the tax office registers the entrepreneur as an "active VAT payer".  From 1 January 2015 the registration of entrepreneurs for VAT purposes is free of charge but an entrepreneur who makes a request for a confirmation of registration, shall be obliged to pay an amount of PLN 170 (formal confirmation of registration is not necessary).

Note!

Since January 2016 there have been new VAT-R forms (you can find them on this website).  The previous  may be used until 30th June, 2016. Notification according to the previous

form  shall be submitted to the head of the tax office competent for the following reasons:

  • address of seat— in the case of legal persons and organisational entities without legal personality,
  • place of residence, in the case of natural persons,
  • permanent place of business activity, in the case of entities  not established within the territory of the country but who have within that territory a fixed place of conducting business activity;

In the case of entities who do not have established business or a fixed place of conducting business activity within the territory of the country, notification according to the template declaration shall be submitted to the head of the Second Tax Office Warszawa-Śródmieście.

Taxpayers benefiting from exemption from VAT — rights and obligations

Entrepreneurs benefiting from the exemption from VAT (a turnover limit up to 150 000 PLN) are not obliged to keep additional records of sales, they can keep only sales records and are not obliged to submit tax returns. Such taxable persons do not have the right to reduce the amount of output tax by the input tax.  Gross amount of purchase is wholly regarded as tax costs in income tax.

Possible waiving of VAT exemption

The taxpayer may waive the exemption due to the amount of turnover provided that a written notice of that intention will be submitted to the Head of the tax office before the start of the month in which they refrain from exemption.

In the case of taxpayers who, in a tax year commence activities liable to VAT, who wish to waive the exemption from first carried out activity - the notification has to be done before the day of carrying out this activity.

If as a taxable person  you lose right to exempt sales from tax or you resign from this exemption, you can benefit from the exemption once again not earlier than one year from the end of the year in which you lose the right to exemption or you resign from this exemption.

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