Amendments to the Act of March 11, 2004 on Goods and Services Tax (Journal of Laws of 2024, item 361), hereinafter referred to as the “VAT Act,” are motivated, among other reasons, by the need to implement EU regulations into Polish law.
1. Exemption for EU-based taxpayers under the “SME” Procedure
According to the amendment to the VAT Act, exemptions will now be available not only to Polish taxpayers but also to taxpayers based in other EU countries, as well as Polish taxpayers conducting business in other EU countries. These solutions will be subject to certain conditions but are generally intended to reduce administrative burdens. Taxpayers conducting business in other EU countries without an established business presence there must register for VAT purposes and comply with all local VAT requirements, which is particularly challenging for small businesses due to limited resources.
Additionally, for Polish taxpayers, the method of calculating the VAT exemption threshold (currently PLN 200,000) will change. Starting in January, the threshold calculation will also include intra-community supplies of goods and reinsurance services, provided these services are not auxiliary in nature.
Local conditions must be met for the entity exemption and the annual turnover (excluding VAT) in the European Union in the previous and current year must not exceed EUR 100,000 (EU threshold).
Important
The proposal also includes changes aimed at implementing EU provisions concerning the place of service provision and a special procedure for artwork, collectibles, and antiques.
We have previously covered the “SME” procedure on prawo.pl – https://www.prawo.pl/podatki/numer-ex-a-zwolnienie-z-vat,527838.html.
2. Place of provision of certain services
New rules for determining the place of provision apply to certain services supplied to taxpayers, such as admission to cultural, artistic, sports, scientific, educational, or similar events, such as fairs and exhibitions, as well as ancillary services related to access to these events, in cases where the end consumer (taxable or non-taxable) participates virtually. This also applies to services related to cultural, artistic, sports, scientific, educational, entertainment, or similar activities, including services provided by organizers of such activities and ancillary services to these services, when provided to a non-taxable person (consumer) if the service is broadcast or otherwise made available virtually.
Regarding the special procedure for artwork, collectibles, and antiques, the proposal provides:
- setting the standard VAT rate for the supply of artwork, collectibles, and antiques, and
- allowing the application of a special procedure for the supply of:
- artwork, collectibles, and antiques previously imported by the taxpayer
- artwork acquired from creators or their heirs
- artwork acquired from a taxpayer not using the special procedure and from a VAT taxpayer other than one eligible under the special procedure, provided that the artwork, collectibles, and antiques imported or acquired by this taxpayer were not subject to a reduced VAT rate.
3. Changes in VAT rates
From January 1, taxpayers will face changes in VAT rates:
- 0% VAT rate on rescue vessels and lifeboats used at sea
- Maintaining the 8% VAT rate for medical devices authorized under the former Medical Devices Act
- Increasing the VAT rate from 8% to 23% on “live equines”
- Raising the VAT rate to 23% on smokable or inhalable hemp products, except for those used solely for medical purposes (so-called medical marijuana)
- Lowering the VAT rate from 23% to 5% on menstrual cups
- Clarifying item 10 of Appendix No. 3 to the VAT Act for fertilizers, plant protection products, and animal feed for farm and domestic animals by referencing relevant industry regulations
The reverse charge mechanism will continue to apply to gas in the gas system, electricity in the power system, and greenhouse gas emission trading rights until December 31, 2026.
