The Ministry of Finance currently has no plans to increase the VAT exemption limit for small firms in Poland, which remains at 200 000 PLN annually, while EU directives suggest a nearly double limit. Experts advocate for its increase, arguing that the current limit no longer aligns with economic realities.
EU regulations allow for a higher limit
Changes in the VAT Act, as outlined in the legislative and programmatic agenda of the Council of Ministers, target small businesses operating across various EU member states. These amendments will enable Polish small businesses to benefit from VAT exemptions in other EU countries, and vice versa for businesses from other EU states operating in Poland. These changes result from the need to implement Council Directive (EU) 2020/285, amending Directive 2006/112/EC and Regulation (EU) No 904/2010. The new regulations should apply in EU countries from 1 January 2025.
The directive specifies that the new entity exemption limit cannot exceed 85 000 EUR, approximately 365 000 PLN. However, the Ministry of Finance has announced that Poland will maintain its limit at 200 000 PLN.
It’s worth reminding that VAT exemption applies to taxpayers whose sales did not exceed 200 000 PLN in the previous tax year (excluding tax amount). These taxpayers may voluntarily choose VAT taxation. For businesses starting operations, the limit is proportional to the duration of business activity within the year. Upon exceeding the 200,000 PLN limit, subsequent sales are subject to VAT. Entrepreneurs should register as VAT payers and may opt out of entity exemption at any time to voluntarily pay VAT. This step can be beneficial for those planning larger purchases and wishing to deduct input VAT.
It’s easy to exceed the limit
More and more entrepreneurs are afraid that they will exceed the threshold of 200 000 PLN and will have to pay VAT and submit JPK files, which is often associated with higher accounting costs. Increasing the limit would be a great convenience for small companies, especially in the face of rising costs of running a business, such as ZUS or labor costs.
