VAT changes in Poland from 2025 – key information for businesses

On November 20, 2024the President of the Republic of Poland signed the Act amending the Value Added Tax Act and certain other acts. The amendment brings Polish law in line with European Union legislation, including EU Council Directive 2020/285 and EU Regulation 904/2010. The provisions, which will come into force January 1, 2025, include, i.a., simplification of administrative obligations relating to goods and services tax for small businesses operating in other EU member states, changes to the rules for determining the place of supply of services, and modifications to VAT rates.

VAT subjective exemption for businesses across the EU

From 2025, legislation will be introduced to allow small businesses to benefit from VAT exemption in other EU member states. This solution will cover both Polish companies operating within the EU and businesses from other member states operating in Poland. The condition for benefiting from the exemption will be registering for VAT purposes in the country where the business activity is based and submitting quarterly turnover reports in each country where the activity is conducted.

In addition, intra-Community supplies of goods and certain services, such as reinsurance, if they are not ancillary, will now also be included in the Polish exemption limit of PLN 200,000 per year. Exceeding the EU-wide turnover limit of EUR 100,000 will result in the loss of the right to exemption across the entire EU. These changes aim to reduce administrative burdens and, according to estimates by the Ministry of Finance, around 10,000 businesses will benefit from them.

Changes to determining the place of supply of services

From 2025, the rules for determining the place of supply of services related to cultural, artistic, sporting, scientific, educational, entertainment, or similar events are changing. These changes are of key importance for taxpayers and consumers participating in such events, especially in the case of their virtual nature.

1. New rules for services provided to taxable persons

For services provided to taxable persons (e.g., businesses or institutions), the place of taxation will change from the location where the event actually takes place to the country of residence of the service recipient.

Examples:

• For fairs, exhibitions, or conferences broadcast virtually, businesses providing admission services or support services will no longer need to register for VAT in the country where the event takes place.
• Instead, VAT will be settled according to the reverse charge mechanism, i.e. it is the buyer of the service in his country that will settle the VAT.
2. Changes for services provided to consumers

For services provided to non-taxable persons (individual consumers), the place of taxation will change from the location of the actual performance of the service (e.g. the country where the event is organised), to the place of residence of the consumer.

• Businesses will need to identify the residence of each consumer to correctly charge VAT.
• For instance, if a Polish service provider organizes a virtual concert accessible to individuals from France, Germany, and Spain, it will have to charge VAT at the rates applicable in those countries.
3. Impact on prices of services to consumers

The new regulations may increase the prices of certain services for consumers, particularly when events are organized from non-EU where VAT rates are lower than in member states.

• A consumer in Germany participating in an event streamed from a non-EU country may pay higher price, as the service will now be taxed at the German VAT rate.
• The changes may be particularly noticeable for services offered virtually by organisers from countries with lower VAT.

Reasons for introducing the changes

The new regulations aim to:

• Adapt tax regulations to the growing popularity of online events and virtual activities.
• Ensure equal competition across the EU, regardless of where services are provided.
• Increase VAT revenues in consumer countries by eliminating the possibility of providing services from lower-tax locations.

Changes to VAT rates

A number of changes to VAT rates will also come into effect on 1 January 2025:

• 0% VAT rate for rescue vessels and lifeboats

Under the new regulations, a 0% VAT rate will apply to all rescue vessels and lifeboatsused for rescue purposes, regardless of whether they are seagoing vessels or vessels intended for operations on inland waters. Prior to the amendment, the 0% rate applied only to seagoing vessels, leading to ambiguity in the application of the rules to other vessels used for rescue purposes.

• Maintaining the 8% rate for medical devices

As part of the amendment to the VAT Act, the 8% VAT rate for medical devices that were authorised under the provisions of the Medical Devices Act in force before 2022 is retained. Under the new regulations, this 8% rate will be applied indefinitely. The decision is justified by the need to ensure stability in the medical device market.

• Change to VAT rate for live equines

In compliance with the EU VAT Directive, Poland is required to change the VAT rate for live equines (e.g., horses and donkeys) from 8% to 23%.

• Change to VAT rate for hemp products

Hemp products intended to be smoked or inhaled without combustion (e.g., dried hemp) will be subject to a VAT rate of 23%, instead of the reduced rate of 8% that has applied so far. It is worth noting that this change only applies to products intended for recreational use, while hemp products used exclusively for medical purposes will remain subject to the preferential VAT rate. This decision is based on the assessment that these products should not benefit from preferential rates, given their use.

• Reduction of VAT rate on menstrual cups

The VAT rate on menstrual cups will be reduced from 23% to 5%. This change aims to harmonize VAT rates for feminine hygiene products.

Other amendments to the VAT Act

Apart from changes to VAT rates, the amendment introduces other significant changes:

1. Clarification of regulations on fertilizers and animal feed

The annex to the VAT Act will include references to industry-specific regulations clarifying the definitions of fertilizers, plant protection products, and animal feed. The aim of this change is to eliminate interpretive doubts that previously complicated the tax classification of these products.

2. Extension of the reverse charge mechanism

The reverse charge mechanism for VAT on gas, electricity, and the transfer of greenhouse gas emission allowances will be extended until December 31, 2026. This change will enable the continuation of efficient VAT settlement in the energy sector, in line with EU regulations.

3. Abolition of the obligation to integrate cash registers with payment terminals

The obligation to integrate online cash registers with payment terminals is planned to be repealed. Until now, non-compliance with this requirement was subject to financial penalties. The repeal is due to technical issues, such as the lack of available devices, and the effectiveness of the current system of reporting transaction data by paying agents.

4. Mandatory fiscalization of vending machines

Transactions made via vending machines and self-service ticket vending machines will now be subject to mandatory fiscalization. Until now, they have been exempt from this requirement, but the change is intended to increase control over sales and services provided via such systems.

Legal basis:

• Act of November 8, 2024, amending the Value Added Tax Act and certain other acts (Journal of Laws 2024 item 1721)
• Council Directive (EU) 2020/285 of 18 February 2020 amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises and Regulation (EU) No 904/2010 as regards the administrative cooperation and exchange of information for the purpose of monitoring the correct application of the special scheme for small enterprises
• Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax

If you have any further questions or require additional information, please contact your business relationship person or use the enquiry form on the HLB Poland website.

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