As of 01 January 2025, taxpayers from the European Union can benefit from the small- and medium-sized enterprises (SME) procedure. The SME procedure concerns changes that directly benefit small- and medium-sized enterprises based in the EU. Thanks to the introduced changes, these entities can benefit from an exemption from valued-added tax (VAT) registration in other EU countries, without the need to register as active VAT taxpayers.
What Conditions Must Be Met?
To benefit from the VAT exemption in Poland, a foreign entity must meet several conditions:
- The total annual value of goods supplied and services rendered by the taxpayer in the previous and current tax year must not exceed EUR 100,000.
- The value of sales in Poland in the previous or current tax year (excluding VAT) must not exceed PLN 200,000 (approximately EUR 47,000), or that amount calculated in proportion to the period of conducting business. If this limit or the proportionally calculated amount is exceeded in the tax year, and the right to exemption is lost, a return to the exemption is possible after a one-year waiting period is applied, starting from the end of the year in which the right to the exemption was lost.
- Poland's Ministry of Finance has announced that this limit will be raised to PLN 240,000 (approx. EUR 56,000) as of 01 January 2026.
- The foreign entity cannot make supplies of goods or services excluded from VAT exemption in Poland, e.g. supplying new means of transport, land for construction, or providing legal services or debt collection services, including factoring.
Obligations of the Foreign Entity
Foreign entities that decide to take advantage of the SME procedure in Poland must be mindful of additional obligations. They must:
- Issue invoices (simplified) at the request of the purchaser. These invoices will not show VAT. The invoices should be marked with a special identification number with the suffix "EX", and indicate the legal basis for the exemption (Article 113a of the VAT Act).
- Maintain sales records allowing the determination of the moment the exemption limit is exceeded in Poland.
- Submit summary reports (if acting as a VAT-EU taxpayer.
When applying for the VAT exemption in Poland, the foreign entity will not be required to submit a VAT-R registration form or register as a VAT-exempt taxpayer.
New Prospects for Small Businesses
The new regulations are a step towards simplifying VAT settlements for the smallest businesses, reducing unnecessary formal burdens and leading to cost reductions. The solution enabling the application of exemptions will undoubtedly contribute to increased competition and the development of cross-border transactions in the EU. On the other hand, especially at the beginning of the commencement of the new regulations, special attention should be paid to the possible change in VAT settlements with counterparts, and thus to their verification.
Originally published by GGI.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
