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.
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 Head of the National Fiscal Administration maintains, in electronic form, the list containing data on:
- entities that were not registered for VAT purposes (or were de-registered), and
- entities registered as VAT payers (i.e. data on active and exempt VAT taxpayers), including entities whose registration as VAT payers has been restored.
According to the MoF, the so-called 'white list' will support verification of counterparties.
Taxpayers using the list will receive information on date and time when verification of the particular entity took place. It is possible to verify your counterparty on a current basis as well as retrospectively, up to five years preceding the year in which verification is made.
According to the Amending Act, expenses paid via transfer to bank account not included in the list cannot be treated as a tax deductible cost. Obligation to settle your expenses with use of bank accounts mentioned in the white list is applicable to transactions exceeding a value of PLN 15,000.
Additionally, payments made to accounts not included in the list will result in joint liability for VAT obligations of the supplier, in the amount equal to the VAT proportionally attributable to the transaction.
Above sanctions will 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 three days from the date of the payment being ordered.
Split payment system in VAT settlements
As of 1 July 2018, split payments regulations have been introduced into the Polish VAT Law. Buyers now have a choice to pay the VAT amount into a dedicated bank account of the seller. Cash deposited in a VAT account is a taxable person’s asset, although it can be used only to pay the VAT liability to a tax office’s account 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 transactions, subject to VAT in Poland, will be required to open a bank account in Poland.
Funds from the VAT account can be used to regulate other tax liabilities (CIT, PIT, excise duty, customs duty) and social security (ZUS) contributions.
The split payment mechanism will be applied 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 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. VAT returns should be submitted 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 fill out tax returns and recapitulation statements. 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.
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 Community customs regulations are directly applicable in Poland. The most important act is the Community Customs Code and its implementing provisions, as well as the Community 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 Community 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).
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 1,540 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, for example, 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 type of coal product, the excise rates are PLN 30.5 per 1,000 kg of coal, PLN 11 per 1,000 kg of lignite, and PLN 35.2 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.
Property tax rates are fixed by municipalities within limits set in the Law on Local Taxes and Fees. In 2019, land used for business purposes is subject to a rate limit of PLN 0.93 per square metre. Buildings used for business purposes are subject to a rate limit of PLN 23.47 per square metre.
A transfer tax may apply to certain civil law transactions, determined as a percentage of the transaction (i.e. such as sale, loan, donation). A tax obligation on civil law transactions does not arise when one of the parties of the transaction is a VAT payer.
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) and contribution/contribution increase (in case of partnerships) is subject to a 0.5% capital tax, payable by a company or partnership that receives a capital contribution. This tax applies equally to limited liability companies as well as joint-stock companies. 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) contribution of shares of the other corporation giving the majority of votes in this corporation or contribution of additional shares in case the corporation to which the shares are contributed already has the majority of votes.
There are no payroll taxes other than social security contributions (see below).
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. The social security shares payable by the employer and the employee are tax-deductible items in their respective income tax settlements.
The rates apply to salaries below the cap of PLN 142,950 in 2019. 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 (see below).
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 principal, 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.
Retail tax postponed until the end of June 2020
On 19 September 2016, the EC opened an in-depth investigation into the Polish tax on the retail sector. The EC has concerns that the progressive rates based on turnover give companies with a low turnover a selective advantage over their competitors in breach of EU state aid rules. The EC has also issued an injunction, requiring Poland to suspend the application of the tax until the EC has concluded its assessment. At this stage, the EC has concerns that the application of progressive rates based on turnover confers a selective advantage on companies with low turnover and therefore involves state aid within the meaning of the EU rules. This progressive rate structure has the effect that companies with low turnover either pay no retail tax or pay substantially lower average rates than companies with high turnover.
The bill amending the Retail Sales Tax (RST) Act to extend the suspension of the tax to 30 June 2020 was published in the Official Journal of Laws in December 2019.