In 2018, the higher subjective exemption limit in VAT was maintained!

In accordance with the decision of the Council of the European Union, the limit of subjective exemption in VAT, which amounted to PLN 150,000, was to be maintained until the end of 2018. However, at the request of Poland, the European Commission has been granted permission to increase the limit in 2017 to PLN 200,000 and to maintain it for 2018. Further extension of this period will depend on the amounts provided in Directive 2006/112 / EC in 2018 and possible re-submission by Poland, an application to extend the current limit.

ย At present, entrepreneurs whose annual turnover does not exceed PLN 40,000 are used for VAT exemption. This amount should be converted at the average exchange rate of the National Bank of Poland on the day of Poland’s accession to the European Union, which gives a contractual value of PLN 200,000. This privilege was granted by way of derogation from the provision of the abovementioned directives under the authorization issued by the EU Council decision.

The above limit was also included in art. 113 of the VAT Act: “Taxpayers with taxable value not exceeding in total in the previous tax year amount to PLN 200,000 are exempt from tax. The amount of tax is not included in the value of sales”.

ย The application of a lower limit in the event of a negative response of the European Council to Poland’s request would significantly reduce the number of entities that will be able to benefit from the VAT exemption. Only small entrepreneurs would retain this right, because in the case of a limit of PLN 50,000 assumed by the directive, the average monthly sales value would have to be less than PLN 4,200.

The subjective exemption in VAT is a great privilege and an opportunity for smaller entrepreneurs. Thanks to thisย  they do not have to waste time charging tax and paying it to the tax office and preparing periodic declarations andย they do not pay tax to the Tax Office out of their own pocket in transactions with unfair contractors who do not pay for goods sold or services rendered.

The limit of subjective exemption in VAT in the amount of PLN 150,000 was to apply until the end of 2018, but Poland applied for its increase and validity until the end of 2018. By the decision of the EU Council, the limit was increased and the period was maintained. Polish entrepreneurs will be able to choose the VAT exemption provided that they do not exceed PLN 200,000 of the turnover limit (in the case of new entities in the first year of their operation the limit is calculated proportionally).

How to use the subjective exemption in VAT?

In the case of persons commencing business activity, the subjective exemption in VAT is granted by law. Entrepreneurs exempt from VAT do not have to submit any declarations informing the tax office about their selection.

The situation is different in the case of entrepreneurs who are already active VAT payers and want to benefit from the subjective exemption. They are entitled to this right at the earliest one year after the end of the year in which they lost or waived the right. To this end, they must submit an update of the VAT-R form.

It is important that in such a case, however, there is an obligation to correct VAT deducted when purchasing equipment, fixed assets or commercial goods that have not been sold. This is due to a change in the destination of goods – from VAT-related activities to activities that are exempt from VAT.