VAT – who must account for VAT, and when can it be waived?
Let’s start with the basics: not every entrepreneur needs to register for VAT. If your company has a revenue of less than PLN 200,000 per year, and on top of that, the type of business is not on the list included in Art. 113 para. 13 of the VAT Law, you can continue to operate without paying VAT.
Registration for VAT applies to entities that do not have a registered place of business in Poland, as well as entrepreneurs who realize:
- delivery of goods subject to excise taxes,
- delivery of art. cosmetics and hygiene,
- The supply of electronic machinery and equipment,
- Delivery of new means of transportation,
- Supply of parts for passenger vehicles and motorcycles,
- delivery of construction sites,
- the supply of goods listed in Appendix 12 of the VAT Law,
- Legal, consulting, jewelry and debt collection services.
On the other hand, there are circumstances in which a businessman – even if he wants to – cannot register for VAT. Examples include companies supplying gold to the National Bank of Poland or making deliveries of agricultural products from their own crops.We wrote more about whether it’s better to join the ranks of VAT taxpayers or give it up in our guide: Is it worth being a VAT payer?
What is the difference between monthly VAT accounting and quarterly VAT accounting?
VAT-registered entrepreneurs are required to file JPK_V7. In the first twelve months counting from the month in which the company joined VAT, the entrepreneur must account for VAT on a monthly basis. Only after one year has passed can the period be changed to quarterly.
Depending on the selected variant, an appropriate file should be prepared every month: JPK_V7M (monthly) or JPK_V7K (quarterly).
The JPK_V7M file consists of two parts: record and declaration in each month. In turn, the JPK_V7K file is divided as follows:
- first month – record part for the first month
- second month – record part for the second month
- The third month – the record part for the third month and the declaration part for the entire quarter.
Important!
Regardless of the chosen frequency of VAT settlement, the JPK file should be prepared monthly.
The main difference lies in the timing of tax payments – entrepreneurs who want to settle quarterly must pay VAT by the 25th. day of the month following the end of the quarter to which the settlement relates.
Example:
Mr. Henry used monthly billing in his first year of business. He prepared a JPK_V7M file every month, and paid VAT on the following dates: for January by February 25, for February by March 25, etc.
In his second year of business, Mr. Henry chose quarterly accounting. He still prepares the JPK_V7 file every month, but pays the value-added tax by the deadlines: for the first quarter by April 25, for the second quarter by July 25, etc.
What is zero JPK V7?
Entrepreneurs do not have to pay VAT every month – if the total amount of deductions exceeds the amount of VAT due, the company has no tax to pay. In such a situation, nothing changes for the entrepreneur – he still has to document all transactions that include VAT by preparing a JPK_V7 file.
However, if a company does not carry out any transactions or other taxable activities for an entire month, and does not make VAT deductions, this does not mean that it is exempt from filing a VAT return. In this situation, the entrepreneur has to file a so-called “business plan”. JPK_V7 null.
In fact, it’s a regular JPK file, filed in exactly the same way. The difference is that in the absence of any transactions, only the fields to identify the entity submitting the JPK file need to be filled in the file.
When is it not necessary to submit a JPK_VAT file?
If you are actively engaged in business and your company is registered for VAT, you must regularly submit single control files to the US. In what situations can you skip this obligation?
- When you give up being an active VAT taxpayer,
- When you suspend your business activities,
- When you close your business.
In other circumstances, the JPK_V7 file will accompany you at all times.
Quarterly settlement – what are the benefits for the taxpayer?
Although by default every business settles for VAT on a monthly basis, some companies change to quarterly mode whenever they have the option. What do they gain by doing so?
- less bureaucracy – adopting a quarterly period means that you pay the VAT due and advance income tax only once a quarter instead of every month – that is, 4 times instead of 12.
- More time – do you want to raise funds to pay your tax or make any adjustments? Choose the quarterly option. If you make a mistake in the declaration part of JPK_V7K, you can attach the correction to the file in the next quarter.
- greater liquidity – the ability to settle obligations to the tax office four times a year means the company has more time to prepare for payments. It can thus plan necessary expenses and investments in greater detail and in advance.
- Cash method – if you have the status of a small VAT taxpayer (i.e. your sales value does not exceed the limit of €2,000,000 in a given tax year), you can use the cash method, through which you will pay tax only when you receive payment from a customer. This will be especially useful for those entrepreneurs who issue invoices with distant payment terms. The cash method, however, requires a bit more work. You should constantly monitor which invoice has been paid and which has not yet been paid. On the other hand, if the contractor pays in parts, the paid part must be settled on an ongoing basis, which means you will have to include one invoice in several or more JPK files.
Important!
The rules for small VAT taxpayers changed in July 2023. Until the end of June, the sales limit was €1,200,000.
Also note that if you run a brokerage firm, manage investment funds, are an agent or provide similar services, lower limits apply to you: the amount of commission or other remuneration for services rendered in the previous tax year cannot exceed 45,000 euros. Above this amount you will lose your status as a small VAT taxpayer.
For detailed provisions on status, see Art. 2 pts. 25 of the VAT Law.
How to switch to quarterly VAT accounting?
Quarterly VAT accounting can prove to be very beneficial for some entrepreneurs. It is worth considering this eventuality, especially if you issue invoices with long payment terms. It is imperative to remember, however, that regardless of the selected mode (monthly or quarterly), the corresponding JPK_V7 file should be prepared monthly, and only the payment is made quarterly.
If you decide to change, all you need to do is update the VAT-R form. You can do this online by confirming the instruction with an electronic signature.
