How to take advantage of the VAT entity exemption in 2024?
If a taxpayer has a business that generated less than PLN 200,000 in sales value in 2023, he can avoid paying VAT in the following year. The amount of the limit has not changed compared to last year.
Note that the sales value does not take into account a number of elements described in Art. 113, para. 1 and 2 of the Act of. March 11, 2004 on Value Added Tax.
So wanting to calculate the value of sales, we will not take into account:
- VAT amount,
- Intra-Community supply of goods,
- Intra-Community distance sales of goods,
- Distance sales of imported goods,
- paid delivery of goods included by the taxpayer in fixed assets under the provisions on income tax,
- paid delivery of amortizable intangible assets,
- paid supply of goods and services exempt from tax under Art. 43 para. 1 of the VAT Law.
However, several exceptions apply to the last point. An entrepreneur cannot benefit from VAT exemption if he realizes:
- supply of goods for consideration and provides tax-exempt services under Art. 43 para. 1 of the VAT Law,
- real estate transactions,
- insurance services or services specified in Art. 43 para. 1 points 6, 12 and 38-41 of the said law.
Have you started a business during the year? Calculate the VAT exemption limit!
If you start a company when the year is already underway, you cannot apply the sales value limit of 200,000 zlotys. Instead, it is necessary to use a simple formula by which you calculate the proportional amount of the limit for the remainder of the year from the start of the business. Exceeding this amount will not allow you to avoid VAT.
Here is the formula:
200000*D/365
In this formula, the letter D stands for the number of days remaining in the year from the date of the start of the business.
Important!
It is worth remembering that when calculating the amount of the VAT exemption limit for a leap year (e.g. 2024), the number 366 should be used instead of 365. This will apply to companies when they verify whether they can use the subjective VAT exemption in 2025.
Example:
Ms. Hanna opened the company on October 10, 2023, so there are 82 days left until the end of the year. The entrepreneur applied the formula given above and got the result of 44,931 zloty 51 gr (200,000 * 82/365). This means that it can enjoy VAT exemption if it anticipates that it will not exceed such sales value.
What if the limit is exceeded?
The PLN 200,000 or proportional limit is the amount up to which the VAT exemption applies. The exemption expires when this amount is exceeded, and any subsequent sales will be subject to VAT.
As soon as the amount of PLN 200,000 is exceeded, the entrepreneur must submit to the appropriate tax office a completed VAT-R form, in other words: register for VAT.
Example:
Ms. Hanna exceeded the limit at the beginning of December 2023 – the sales value achieved by her company at that time amounted to PLN 45,700. The entrepreneur immediately registered for VAT and paid tax on the first transaction, which topped the amount of 44,931 zloty 51 gr. This situation also means that Ms. Hanna will not be eligible for VAT exemption in 2024.
Can the VAT exemption be waived?
An entrepreneur has the right to opt out of the VAT exemption. To do so, he must submit a notice of his desire to resign. The notice should be made in writing and sent to the head of the relevant tax office.
A taxpayer who no longer wishes to enjoy VAT exemption must notify the office no later than the last day of the month preceding the month in which he plans to abandon his right to VAT exemption.
Important!
If a company gives up its tax exemption, it must immediately register for VAT – submit a completed VAT-R form.
Activities that take away the right to subjective VAT exemption
The Value Added Tax Law lists a number of services the provision of which disqualifies an entrepreneur from being eligible for VAT exemption.
You are not entitled to VAT exemption if:
- you make deliveries of the goods listed in Appendix. No. 12 to the VAT law,
- you make supplies of goods subject to excise taxes, except:
- Electricity,
- cosmetic products (including perfumes and toilet waters, manicure and pedicure cosmetics, facial beauty products, personal deodorants),
- toilet preparations for animals,
- Playing cards – excluding playing cards for children),
- tobacco products (cigars, cigarillos, cigarettes made from tobacco or tobacco substitutes, tobacco and snuff),
- new means of transportation,
- Construction areas and areas to be developed,
- You provide legal and consulting services,
- You provide jewelry services,
- You do not have a registered office or place of residence in the national territory.
For a complete catalog of activities that exclude eligibility for VAT exemption, see Art. 113 of the VAT Law.
How to return to the entity VAT exemption?
If you have lost your right to VAT exemption, for example by exceeding the PLN 200,000 limit, you can return to using the exemption in the future. However, there is a condition that must be met: another full year must have elapsed since the year in which the company ceased to be exempt from VAT or abandoned it.
Example:
Ms. Hanna lost her right to use the VAT exemption in December 2023 and registered for VAT. In the following year, its sales fell and amounted to 186,540 zlotys, which means that it is within the limit (assuming that the limit for 2025 will be the same as now). Ms. Hanna can once again benefit from the exemption of goods and services tax from 2025.
Subject VAT exemption
Some entrepreneurs can use the subject VAT exemption (instead of the subject VAT exemption). This option does not take into account the value of sales – and no other amount limits apply. The key criterion is the type of goods supplied or services provided by the entrepreneur.
Art. 43 para. 1 of the VAT Law indicates which goods and services are covered by the VAT exemption in question. These include:
- The supply of goods used for tax-exempt activities,
- supply of agricultural products and provision of agricultural services by a flat-rate farmer,
- The supply of human organs and breast milk,
- The supply of blood, whole plasma, blood cells or blood products of human origin if they are not drugs,
- Supply of undeveloped land other than construction sites,
- delivery of buildings, structures or parts thereof with exceptions specified in the law,
- Management services for investment funds, equity funds, open pension funds, etc..,
- health care services,
- private teaching services at the pre-primary, primary, secondary and tertiary levels provided by teachers,
- …and many others.
