Vat in Poland

VAT was first introduced in France in 1954. Its widespread use was due to the need to harmonize the taxation of countries belonging to the European Union and was established by means of directives from 1967. VAT has been in force in Poland since 1993. Learn what exactly VAT is and what are the rules of its determination.

What is VAT?

Goods and services tax, commonly known as VAT, is a levy which applies to both sellers and purchasers because its value is added to the net value of the purchase-sale transaction. The mechanism of accounting for VAT means that in reality the amount of tax is passed on to the consumer. VAT is introduced one by one at each stage of production by the value-adding actors. The entrepreneur, therefore, pays the tax depending on the net value of sales. Furthermore, he is entitled to deduct the VAT provided that the expense to which the tax is linked is related to taxable activities. As a rule VAT should be economically invisible (neutral) for a business which is not the ultimate consumer of goods or services.

Vat rate Poland

VAT rate in Poland is a subject of heated discussions — for many years there has been a debate about the rates. Until 2011, 22% VAT was imposed on goods and services. However, the rates have been raised and for the time being there is no sign of going back to what was in force 10 years ago. So how much is Poland vat rate? The basic rate is 23%. They also have reduced rates:

  • 8%;
  • 5%;
  • 0% (zero VAT rate).

What is the rate in case of supply of goods and provision of services including e.g. renovation, modernization of buildings, sports, recreation or health care? In this case we pay 8% tax. On the other hand, 5% rate applies to basic food products, e.g. flour, meat, dairy products, fruit, vegetables.

Currently, due to the epidemic situation in Poland, rising energy prices and high inflation, the government has requested the European Commission to reduce the VAT rate on food. The Minister of Finance postulates the introduction of a zero rate. The change is expected to improve the situation of households in our country. It is unknown whether the EC will agree to the changes. Currently, according to the provisions of the VAT Act, the zero rate may be applied to, e.g. selected transport services, services consisting in repairing, refining, processing or converting goods or supplying computer equipment to charities and schools.

Poland vat rate — how is it calculated?

The gross price of a product or service is the amount with VAT added, and the net price is the amount before VAT. The easiest way to present it is to use a diagram:

gross price = net price + VAT

Entrepreneurs who want to be sure what VAT rate to charge may use a calculator taking into account the so-called VAT rate matrix.

How to calculate VAT?

How to calculate the VAT? It is not difficult. As we mentioned earlier, it is the entrepreneurs responsibility to calculate the amount due and pay it to the tax office. How to calculate the VAT payable? The mechanism of paying the tax involves two concepts:

  • Input VAT;
  • output VAT.

Input VAT is the tax paid by an entrepreneur for goods and services necessary to conduct its business. On the other hand, output VAT is the tax that the seller adds to his products (services). The difference between output VAT and input VAT must be paid to the tax office.