Value Added Tax (VAT) is one of the most important sources of income for the Polish budget. In Poland, the standard VAT rate is 23%, which can be a burden, especially if the company deals with large volumes of goods and services and needs to pay this tax regularly. However, the Polish tax code offers several opportunities for legislative optimization of VAT, which allows minimizing taxes and reducing the financial burden on businesses.
What is VAT and how does it work in Poland?
VAT is an additional tax that consists of the added value of goods and services at each stage of their production or distribution. In Poland, the standard VAT rate is 23%, although for some goods and services, reduced rates are provided - 8%, 5% or 0%. We thought that we pay VAT to the budget and can get it back if they buy goods or services from suppliers who are also VAT payers. However, for many entrepreneurs, VAT can become a tax obstacle.
Possibilities for VAT avoidance under the Polish Tax Code
1. Using VAT exemptions
The Polish Tax Code provides for a number of VAT exemptions for certain types of activities. This means that companies operating in these types of activities cannot trade off VAT. These exemptions include:
Small businesses: technologies whose turnover does not amount to PLN 200,000 per year can benefit from VAT exemptions. This exemption allows businesses not to charge VAT on their products or services, and not to pay this tax when receiving goods and services from other suppliers. However, they also cannot recoup VAT paid on input.
Certain types of services and goods: For example, educational, medical, financial and insurance services may be exempt from VAT. If a business provides such services, it can avoid paying VAT for these types of activities.
Export of goods: Export of goods from EU countries is also exempt from VAT. This can be beneficial for companies engaged in international trade.
2. OSS (Single Window) System
For businesses that sell goods and services in other EU countries, Poland provides the opportunity to use the Single Window System (OSS), which allows you to pay VAT only in one country, rather than in all the countries where the company sells a little. This significantly reduces tax costs and reduces administrative costs, especially for companies that operate with some changes in the EU.
- Advantages of OSS: Provide the opportunity to avoid the need to register and pay VAT in different EU countries if you sell goods or services online in other EU countries. Instead, this company can pay VAT in Poland at the rate corresponding to the VAT payment in the country of consumption.
3. Transactions with variable reallocation
A company that operates with several divisions or subsidiaries can use transactions with standard reallocation to minimize VAT. In such cases, if the company operates within one group, it can carry out transactions that are not subject to VAT, since such transactions can be exempt from tax.
- How does it work? For example, if one company within a group provides goods or services to another company in the same group, such a transaction may be exempt from VAT. It is important that these transactions are properly processed and designated in accordance with the requirements of tax legislation.
4. Transition to a simplified system for small entrepreneurs
The Polish tax code provides for simplified criteria for entrepreneurs, called "ryczałt od przychodów ewidencjonowanych". This allows small companies that do not exceed complex income thresholds to pay tax based on income rather than on value added. This scheme can be beneficial for businesses, as it does not have significant VAT costs and requires simplified reporting.
5. VAT zeroing for certain transactions within the EU.
If a company purchases goods or services from another VAT payer within the EU, it can take advantage of the VAT zeroing scheme, when the goods or services are not taxed, the buyer must declare VAT in his own country. This scheme is widely used for purchases of goods and services within the EU.
If you want to optimize your tax obligations and avoid unnecessary VAT costs, contact IT-OFFSHORE specialists. Our experts will help you competently use all the possibilities of the Polish tax code to minimize tax risks and increase the efficiency of your business.
