Tax authorities vigorously execute new VAT laws

Just three months have passed since the Polish government introduced tougher regulations on VAT registration of business entities, and tax authorities have already cancelled VAT numbers of over 30 thousand companies, as statistical data for the first quarter of 2016 show.

The new law, which came into force on 1 January, gives fiscal authorities much greater power with regard to removing entities from the register of VAT taxpayers than before. Being removed from the register and losing one’s VAT number in practice means an entity is stopped from carrying out trading activity.

The updated Act on Tax on Goods and Services (aka the VAT act) stipulates the instances when a business entity may be removed from the register of VAT taxpayers. The most serious offence is issuing the so-called “empty” invoices documenting business transaction that never took place. This constitutes tax fraud and is punishable with prison sentence.

Failing to respond to summonses from the authorities despite being properly notified about a need to do so also leads to de-registration. When a tax office cannot contact an entrepreneur, they may come into a conclusion the taxpayer does not exist or that the data provided by the taxpayer are incorrect.

The fourth offence that leads to deregistration is failure to submit mandatory VAT tax returns for 6 consecutive months or 2 consecutive quarters or reporting no sales or purchases in the same period of time. Suspending activity for more than 6 months also leads to losing one’s VAT number.

Out of the 39 thousand entities that lost their VAT number in 2017, the vast majority (over 25 thousand companies) suspended their activity, while over 7 thousand businesses reported no transactions. More than 3 thousand companies did not file VAT tax returns and in almost 500 cases authorities were not able to get in contact with the taxpayer. 12 taxpayers presented fiscal authorities with fake invoices.

Deputy minister of finance Michał Banaś assured that removing an honest taxpayer from the register is practically impossible.

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.