Reduced or Zero VAT on Food to Be Introduced in Poland Soon

EU finance ministers agreed that states should use more reduced, including zero, VAT. The Polish Finance Minister asked for approval to apply the temporary reduction even before the directive was adopted by the Council.

European Union finance ministers discussed the reform of the VAT rules to make the tax more responsive to ‘the needs of the present’ and can be used as a rapid response tool during economic difficulties. The participants of the ECOFIN meeting managed to reach an agreement on updating the list of goods and services to which Member States may apply zero VAT rate.

The Updated Policy About Zero VAT on Food:

The European Commission recalled that the current VAT rules are almost 30 years old and require “urgent modernization”. For the first time, a proposal to expand the catalog of goods was submitted in 2018, but negotiations continue today. The main reason for this is the unanimity required to make such a decision. Ministers agreed that legislation should be adopted to give governments more flexibility to apply reduced taxes.

The agreement adopted by the ministers of finance is the implementation of Poland’s postulate, which has repeatedly asked for the possibility of wider use of reduced and zero VAT rates. Today the lowest rate in the EU is 5%. and states must be specifically authorized to go below this level. For example, Spain has obtained consent to zero VAT on books to 4%, and in Poland, it was reduced to 5% in 2019. The Ministry of Culture applied to the European Commission for consent to reduce the tax to zero, as it saw it as a tool to support literacy, but it has not received such consent – unlike Spain, which could legally drop below 5%.

In November, Prime Minister Mateusz Morawiecki declared that our country would like to lower VAT on certain food products. When he presented the assumptions of the anti-inflationary shield, he informed that the government’s first idea was to zero VAT, but the European Commission did not agree to it. He was accused of ignoring the truth because EU officials admitted that Poland had not submitted any application in this matter. Ultimately, the ministry applied for approval to lower the tax on certain foods.

The government would like to reduce taxes as soon as possible in order to help Poles in times of high inflation. According to Business Insider Polska, the list of products that would benefit from the preferential rate includes meat and fish and their products, dairy products, vegetables and fruit, and their products, cereals, milling industry products, cereal preparations, and bakery products, fats and oils, certain drinks (e.g. containing at least 20% fruit or vegetable juice, milk drinks, and so-called plant milk).

What This Means for Businesses in Poland

Tax policy changes in Poland have direct implications for both domestic and foreign-owned businesses. Companies operating in Poland must stay informed about regulatory developments to optimize their tax position and maintain compliance. The Polish tax system includes CIT (19% standard, 9% for small taxpayers), VAT (23% standard rate with reduced rates of 8% and 5%), and various sector-specific levies.

For international entrepreneurs and investors, understanding the Polish tax landscape is essential for business planning. Poland offers several attractive incentives including the Polish Investment Zone (up to 15 years of CIT exemption), R&D tax relief (up to 200% deduction), and the IP Box regime (5% effective CIT rate on qualified intellectual property income). Professional tax advisory can help identify the most beneficial structure for your specific situation.

The interplay between Polish domestic tax law and international tax treaties is particularly important for foreign-owned entities. Transfer pricing regulations, withholding tax provisions, and anti-avoidance rules (GAAR) require careful navigation to ensure both compliance and optimization.

If you are doing business in Poland or considering entering the Polish market, Zalewski Consulting can help. Learn more about our tax advisory services in Poland, or contact us for a free consultation.