Value-added tax (VAT)
Polish VAT applies to the following activities:
- Supplies of goods and services within the territory of Poland.
- Exports of goods outside the territory of the European Union.
- Imports of goods from countries that do not belong to the European Union.
- Intra-Community acquisitions of goods (imports from countries belonging to the European Union).
- Intra-Community supplies of goods (exports to the countries belonging to the European Union).
The VAT rates are 23% (standard rate), 8%, 5%, 0%, and exemption.
The standard 23% VAT rate generally applies to the supply of all goods and services, except for those that are covered by special VAT provisions that provide other rates or treatments.
Supplies covered by a reduced rate of 8% include, among others, supplies of pharmaceutical products and passenger transport services and also supply of goods for the Social Housing Programme (no greater than 150 square metres).
Supplies covered by a reduced rate of 5% include books and journals, unprocessed food, and basic food.
Zero-rated activities include, among others, exports of goods to countries outside the European Union.
VAT-exempt supplies include, among others, certain financial, insurance, and educational services.
In the period from 1 February 2022 to 31 December 2022, so as to counteract the effects of the inflation in Poland, the tax rate for basic food products, other than those classified according to the Polish Classification of Goods and Services under food and beverage serving services, has been reduced to 0%. It is expected that the reduced VAT rate will apply until 30 June 2023.
Basic calculation rules
In general, the VAT due equals the VAT on outputs decreased by the VAT on inputs (in other words, input VAT is deducted from output VAT). Input VAT may be deducted from output VAT when a business (with a VAT payer status) receives an invoice for goods or services purchased. Input VAT may not be deducted unless a purchased supply is linked to the VATable activities. Furthermore, the deductibility of input VAT is restricted by the VAT law with respect to the purchase of certain goods and services. In addition, subject to numerous conditions, output VAT may be reduced when receivables, resulting from VATable sales, become uncollectible.
'White list' of VAT payers
The amendment of the Polish VAT Act introduced regulations on the electronic database of taxpayers registered for VAT purposes in Poland.
As of 1 September 2019, the electronic database of taxpayers (‘white list’) was introduced. The list contains data on the VAT status of the entities that were, in particular:
- not registered for VAT purposes (or were de-registered), and
- registered as VAT payers (i.e. data on active and exempt VAT taxpayers), including entities whose registration as VAT payers has been restored.
The list is extended by the additional data (e.g. bank accounts numbers indicated in the tax forms filed to the tax office).
Obligation to settle expenses with use of bank accounts mentioned in the white list is applicable to transactions exceeding a value of PLN 15,000. Expenses paid via transfer to a bank account not included in the list cannot be treated as a tax-deductible cost. Additionally, payments made to accounts not included in the list result in joint and several liability for VAT obligations of the supplier, in the amount equal to the VAT proportionally attributable to the transaction.
The above sanctions do not apply if the taxpayer notifies the head of the tax office about the payment made to an account other than the one included in the list within seven days from the date of the payment being ordered. During the period of the epidemic threat and the epidemic state announced in connection with COVID-19, the deadline for submitting the notification about the payment made to an account other than the one included in the list is extended to 14 days from the date of the payment being ordered.
Split payment system in VAT settlements
As of 1 July 2018, split payment mechanism in B2B transactions has been introduced into the Polish VAT Law, replacing reverse charge for selected groups of goods and services. It assumes that the bank transfer is divided into net amount and VAT; the VAT amount is credited to a dedicated bank account of the seller. Cash deposited in a VAT account can be used only to pay VAT liability or other tax liabilities (CIT, PIT, excise duty, customs duty) and social security (ZUS) contributions or to pay the VAT shown on acquisition invoices to the supplier’s VAT account. Cash in a VAT account may only be sourced from VAT payments made by acquirers or refunds of VAT from tax authorities.
A mandatory split payment mechanism for B2B supplies of selected goods and services entered into force on 1 November 2019. Obligatory split payment applies only to transactions between taxpayers, which are subject to VAT in Poland, documented by invoices in which the total amount of receivables exceeds PLN 15,000 (gross). Foreign entities settling transactions by bank transfers, subject to VAT in Poland, are required to open a bank account in Poland.
The obligatory split payment mechanism applies to 150 product and service groups determined in accordance with the Polish Classification of Products and Services (PKWiU) of 2008.
In general, the following groups of goods and services can be distinguished:
- Steel products, precious metals, non-ferrous metals.
- Waste, scrap, recyclable materials.
- Electronics, specifically processors, smartphones, phones, tablets, netbooks, laptops, game consoles, inks, toners, hard drives.
- Fuels for cars, fuel and lubricating oils.
- Greenhouse gas emission rights.
- Building and constructions services.
- Sale of car and motorcycle parts.
The Polish VAT law allows direct refunds when input VAT (available for deduction) exceeds output VAT.
A Polish business may also be entitled to the VAT refund owed by another country under certain circumstances. Likewise, a foreign business having a seat or fixed place of business for VAT purposes outside of Poland may be, in most cases, entitled to the refund of Polish VAT. If the respective countries belong to the European Union, the procedure is substantially simplified due to the EU Directive, which provides favourable rules for businesses based in EU countries that are seeking VAT refunds in other EU countries (i.e. electronic VAT refunds are possible).
The treatment of international services largely depends on the place of supply since it is determinative of whether particular services are subject to the Polish VAT. The Polish VAT applies only to those services that are supplied within Poland.
Generally, the VAT reporting period is one month; quarterly reconciliation of VAT may apply to small taxpayers. VAT should be reported and reconciled by the 25th day of the month following the VAT reporting period. Legislation obligates the VAT-registered taxpayers (except those exempt from VAT) to keep computerised records of all data required to fulfil reporting obligations. Documents must be filed in the Standard Audit File for Tax (SAF-T) format, both in the case of an inspection and with respect to the VAT records.
From 1 October 2020, entrepreneurs are required to submit VAT SAF-T files in the extended version, including information from the VAT return (V7M, VDEK).
With the introduction of VDEK, the obligation to submit VAT returns in their previous form was abolished.
The option to form a VAT group, newly introduced to the Polish tax system (available to taxpayers as of 2023), is discussed in the Group taxation section.
As a member of the European Union, Poland belongs to a customs union, thus only goods imported from non-EU countries or exported from Poland to non-EU countries are subject to customs duties and formalities. Moreover, all the Union customs regulations are directly applicable in Poland. The most important act is the Union Customs Code and its implementing provisions, as well as the EU Customs Tariff.
These regulations are supplemented with certain Polish national rules, especially in respect to procedures and specific areas that are not defined in the EU customs law (e.g. strict regulations concerning the export of works of art and animals, limits on the amount of cash that may be brought from Poland to non-EU countries).
One of the most important novelties to be introduced in 2023 in the field of EU’s customs regulations is the Carbon Border Adjustment Mechanism (CBAM). The regulation is aimed at equating the situation of producers manufacturing goods in the European Union (where restrictions on reducing greenhouse gas emissions are already in force) with producers transferring production to third countries in order to reduce their costs.
The mechanism will initially apply only to certain goods from the following list:
- Iron and steel.
In fact, the year 2023 is only the beginning of the transitional period that will last until the end of 2025. During this period, importers of the abovementioned goods are required to report greenhouse gas emissions (GHG) embedded in their imports, thus it only applies to direct emissions and no payment is required.
Once the full system is operational as of 1 January 2026, the importers will be compelled to purchase certificates at a cost equal to the carbon price that would be requested for the goods manufactured under the EU's carbon pricing rules. Additionally, each year importers will be required to declare the quantity of goods (in the scope indicated above) imported into the European Union in the previous year and their embedded GHG.
The CBAM regulation is expected to enter into force as of 1 October 2023.
Excise duties are levied on the production, sale, import, and intra-Community acquisition of ‘excise goods’, which are listed in the excise duty law and include (among others) alcohol, cigarettes, energy products (e.g. petrol, oils, gas), passenger cars, and electricity.
Depending on the excise goods in question, one of four methods of calculating excise tax may be applicable:
- A percentage of the taxable base.
- An amount per unit.
- A percentage of the maximum retail price.
- An amount per unit and a percentage of the maximum retail price.
The excise rate for car petrol is PLN 1,529 per 1,000 litres.
Passenger cars are subject to the following excise rates:
- 3.1% for cars with engine cubic capacity that does not exceed 2,000 cc.
- 18.6% for cars with engine cubic capacity that exceeds 2,000 cc.
Notwithstanding the above, Polish excise duty law provides for a wide system of excise duty exemptions as well as 0% taxation. Under specified circumstances, such preferential treatment may apply to specified goods that are otherwise taxed based on general rules. This concerns, mostly, specific energy products used for other purposes than as a fuel or for heating.
There is also an excise duty placed on coal. Depending on the product, the excise duty rates for energy products are for coal and coke intended for heating purposes. The rates are PLN 32.84 per 1,000 kg of coal, PLN 11.87 per 1,000 kg of lignite, and PLN 37.95 per 1,000 kg of coke. In practice, there are a wide range of excise duty exemptions (practically, Poland has used all the exemption options provided in the EU Directive); nevertheless, many new administrative obligations have been set for entities producing, distributing, and using coal. The fulfilment of those obligations is necessary in order to apply an excise duty exemption.
On 1 February 2021, the Central Register of Excise Entities was launched. Information on the use of excise goods by entities from all over the country is collected in the Register.
Property tax is imposed on the following real properties:
- Buildings or parts of buildings: Taxed on usable area.
- Structures or parts of structures used for an economic activity: Taxed on initial value adopted for tax purposes, not reduced by depreciation write-offs.
- Land (if not subject to the farming tax): Taxed on area.
Taxpayers liable to property tax are individuals and other entities that are:
- the owners or independent possessors of properties
- possessors of properties that are state-owned, or
- permanent landholders.
Property tax rates with regard to buildings and land are established on a yearly basis by municipalities within limits set in the Law on Local Taxes and Fees. In 2023, land used for business purposes is subject to a rate limit of PLN 1.16 per square metre. Buildings used for business purposes are subject to a rate limit of PLN 28.78 per square metre. The property tax rate for structures is fixed at 2% of the initial value.
Legal persons submit tax returns for a given tax year by 31 January to the local authority competent for the location of the objects of taxation. The tax should be paid in monthly instalments by the 15th day of each month (with exception for the first instalment in a given year by 31 January).
A transfer tax (civil law activities tax) may apply to certain civil law transactions (i.e. sale, loan, donation), determined as a percentage of the transaction value. Sale and exchange are taxed at 1% (property rights) or at 2% (tangibles and real estate), with the market value being the tax basis. Loans are taxed at 0.5%.
The law provides a number of exemptions, including an exemption for transactions that are subject to VAT or where at least one of the parties of the transaction is exempt from VAT. This exemption is not applicable to VAT-exempt transactions on shares or real estate.
In Poland, some activities are charged a stamp duty. Payment is required, for example, in connection with the submission of a power of attorney, after completion of an official act, or the issue of a certificate or permit.
A share capital increase (in case of corporations, i.e. limited liability companies and joint-stock companies) and contribution increase (in case of partnerships) is subject to a 0.5% capital tax (civil law activities tax), payable by a company or partnership that receives a capital contribution.
A merger, division, or transformation of a corporation into another corporation is not subject to capital tax, even if the transaction results in a share capital increase. A similar exemption applies to a capital increase resulting from (i) an in-kind contribution of an enterprise or its organised part or (ii) a qualified share-for-share exchange concerning corporations.
There are no payroll taxes other than social security contributions (see below) as a financial burden for employers. Employers are required to pay employee’s remuneration under deduction of the income tax due, acting as tax remitters.
Social security contributions
Both the employer and the employee are obligated to contribute to the Polish social security system. Apart from paying its own share, the employer is obligated to withhold the employee‘s share of the social security contributions and remit them to the Social Security Authorities (ZUS). In both cases, the relevant payments shall be made monthly.
The employer pays total contributions in a range of 19.48% to 22.14% of the employee’s gross salary (the employer’s contribution rate includes an accident insurance element that varies according to the number of employees insured and the business sector). The contribution rate for the employee is 13.71% of gross salary on social security and 9% of the base (income minus the sum of the employee's social security contributions) on statutory health insurance. The social security shares payable by the employer and the employee are tax-deductible items in their respective income tax settlements. The statutory health contribution is non-deductible either from the tax base or the income tax (deduction from tax disallowed as of 2022).
The rates of social security contribution apply to salaries below the cap of PLN 208,050 in 2023. The cap changes every year. After exceeding this cap, the salary is subject to a contribution rate of 3.22% to 6.41% payable by the employer and 2.45% payable by the employee.
Tax on certain financial institutions
A tax on certain financial institutions (so-called ‘banking tax’) is levied on:
- Banks, branches of foreign banks, branches of credit institutions, and credit unions.
- Insurance companies, reinsurance companies, branches of international insurance companies and international reinsurance companies, and main branches of international insurance companies and international reinsurance companies.
- The lending institutions within the meaning of the Consumer Credit Act.
Tax at the rate 0.44% per year (0.0366% per month) is levied on the assets of the taxpayers less (i) PLN 4 billion in case of banks, (ii) PLN 2 billion in case of (re-)insurance companies, and (iii) PLN 200 million in case of lending institutions. In case of (re-)insurance companies and lending companies, tax is levied on the consolidated assets of the capital group companies.
On 1 September 2016, the Retail Tax Act of 6 July 2016 entered into force, but was quickly suspended due to an EC investigation into the Polish tax on the retail sector. After several postponements, this law came into force on 1 January 2021.
Based on the Retail Tax Act, retailers are to be taxed on the revenues achieved on retail sales, which should be understood as sales of goods to consumers for remuneration, in case an agreement is concluded on the business premises or away from business premises of the given taxpayer. Thus, e-commerce sales should not be subject to this tax. In this context, the services associated with retail sales should also be subject to taxation, unless they are recorded separately than the sale of goods.
Retail tax rates
The retail tax should be imposed on the excess of revenues over the amount of PLN 17 million, calculated, in principle, based on the turnover registered by the cash registers. The Act introduces two tax rates: 0.8% of the tax base for the given month, in the part not exceeding the amount of PLN 170 million, and 1.4% of the excess of the tax base, in the part exceeding the amount of PLN 170 million.
The retailers shall be obligated to submit tax returns and calculate and pay retail tax in the monthly settlement periods. However, no tax return must be submitted in case the revenues in the given month do not exceed the value of PLN 17 million.
Retail tax exemptions
The Retail Tax Act includes certain exemptions from taxation, among others, in respect of:
- energy, water, natural gas, and heat supply to consumers made by network utilities
- supply of some fuels designated for heating fuel purposes, and
- supply of medicines, special purpose nutrition, and reimbursed or partially refunded medical products.
On 1 January 2021, the capacity fee charged for electricity entered into force. The law introducing the fee was passed by the Parliament in 2017.
It will be a new item on the bills for electricity consumed by each consumer.
The capacity fee will be collected, inter alia, from end users connected directly to the transmission network and electricity distribution system operators.
The power charge in 2023, depending on annual energy consumption (the 2022 power charge in brackets), will be:
- Below 500 kWh: PLN 2.38 (PLN 2.37).
- From 500 kWh to 1,200 kWh: PLN 5.72 (PLN 5.68).
- Between 1,200 kWh and 2,800 kWh: PLN 9.54 (PLN 9.46).
- Above 2,800 kWh: PLN 13.35 (PLN 13.25).
For other groups of customers, the charge will depend on the amount of electricity taken from the grid during selected hours of the day (on working days from 7:00 a.m. to 9:59 p.m.) and will amount to PLN 0.1024/kWh (compared to PLN 0.1026/kWh in 2022).
Sugar tax and fee on alcoholic beverages
The fee on foodstuffs, the so-called 'sugar tax', was imposed on beverages with added sugars, sweeteners, and caffeine or taurine. The amount of the sugar tax is:
- PLN 0.50 for the content of sugars in an amount equal to or less than 5 g in 100 ml of drink, or for the content of at least one sweetener in any amount.
- PLN 0.05 for each gram of sugar above 5 g in 100 ml of drink.
Drinks containing the addition of caffeine or taurine will be charged a fee of PLN 0.10 per litre of drink. This fee will be paid, among others, by entities supplying retail stores.
The fee for the permit for domestic wholesale trade in alcoholic beverages with alcohol content above and below 18% will be imposed on alcoholic beverages in unit packages with a nominal quantity of the drink not exceeding 300 ml.
Product fee - quasi taxation in Poland
According to the Polish Waste Act, every entity is required to enter the waste register if they introduce to Poland (meaning production, import, or intra-Community acquisition to Poland to be used or sold) the following categories of product:
- Products in packaging.
- Electric and electronic equipment.
- Lubricating oils/preparations.
Apart from registration, entities introducing products to the market are required to calculate and cover product fee (on an annual basis) or ensure recycling of certain amount of products similar to those that were introduced by the entrepreneur (e.g. if you introduce plastic packaging, you need to ensure recycling of plastic packaging; it does not have to be the same packaging). The obligation applies also to companies who only have VAT registration in Poland (i.e. they do not have to be established in Poland).