Value Added Tax in Poland
I. Introduction
The Value Added Tax (VAT) stands as the preeminent instrument of indirect taxation across the European Union, operating as a general, multi-stage levy imposed at each phase of the commercial supply chain on the incremental value generated therein. Its fundamental design rests on a deceptively simple premise: the economic incidence of the tax falls upon the ultimate consumer, while intermediary participants in the chain of supply achieve fiscal neutrality through the mechanism of deducting input tax against output tax liability. In practice, however, the application of this seemingly straightforward architecture gives rise to formidable complexity — a complexity that is at once doctrinal, administrative, and deeply consequential for taxpayers operating within the Polish tax law order.
This article examines the normative foundations, structural principles, and practical dimensions of the Polish VAT regime, situating it within the broader framework of EU harmonization while attending to the distinctive features of its domestic implementation.
II. Sources of Law
The legal framework governing VAT in Poland is anchored in a multi-layered normative architecture, reflecting the dual sovereignty inherent in EU tax harmonization:
Primary domestic legislation. The Act of 11 March 2004 on the Tax on Goods and Services (ustawa o podatku od towarów i usług, hereinafter “the VAT Act”) constitutes the foundational instrument of Polish VAT law. It has undergone numerous amendments to accommodate evolving economic conditions and successive waves of EU regulatory reform.
EU directive framework. Council Directive 2006/112/EC on the common system of value added tax — which superseded the historic Sixth Directive — establishes the harmonized parameters within which Member States must configure their domestic provisions. It functions as both a ceiling and a floor for national legislative discretion, demarcating the permissible bounds of divergence.
Directly applicable EU regulation. Council Implementing Regulation (EU) No 282/2011 operates with direct effect across all Member States, supplying granular rules that elaborate upon the Directive’s provisions, particularly with respect to the place of supply for services and the identification of taxable persons.
Domestic subordinate legislation. A substantial corpus of ministerial regulations issued by the Minister of Finance governs specific operational matters, including exemptions, reduced rates, invoicing requirements, fiscal cash registers, and the National e-Invoice System (Krajowy System e-Faktur).
EU customs legislation. The Union Customs Code (Regulation No 952/2013) and its delegated acts bear directly upon VAT obligations insofar as they govern the importation of goods and the customs procedures that determine the tax base and the moment of chargeability on import transactions.
A further — and often underappreciated — source of law consists of derogation decisions adopted by the Council of the European Union, pursuant to which Poland has secured authorization to apply measures deviating from the Directive. Notable examples include restrictions on input VAT deduction for expenditures associated with motor vehicles and the mandatory application of the split payment mechanism for designated categories of transactions.
III. Scope of Taxation
The VAT Act defines the taxable universe through an exhaustive enumeration of chargeable events, each of which triggers distinct substantive rules:
Supply of goods for consideration. This encompasses any transfer of the right to dispose of tangible property as owner. In specified circumstances, gratuitous transfers of goods for purposes extraneous to the taxpayer’s economic activity are treated as supplies for consideration and thus fall within the scope of the tax — a deeming provision designed to prevent the erosion of the tax base through non-arm’s-length dispositions.
Supply of services for consideration. Defined residually as any transaction that does not constitute a supply of goods, this category captures all forms of economic activity yielding consideration. Notably, gratuitous supplies of services may also attract VAT liability where they serve the personal purposes of the taxable person or of its employees — an anti-avoidance measure mirroring the treatment of gratuitous goods.
Importation of goods. The entry of goods from the territory of a third country into the territory of Poland constitutes a chargeable event, subject to the rules governing customs valuation and the applicable rate.
Exportation of goods. The confirmed dispatch of goods beyond the territory of the European Union is, as a matter of principle, subject to the zero rate — a mechanism that ensures the destination-based character of the tax in cross-border trade.
Intra-Community supply of goods (ICS). The dispatch of goods to an acquirer established in another Member State is subject to the zero rate, provided that specified evidentiary conditions are satisfied, thereby shifting the taxing jurisdiction to the Member State of destination.
Intra-Community acquisition of goods (ICA). The acquisition of the right to dispose of goods as owner, where such goods are transported from another Member State, constitutes a taxable event in the Member State of arrival, completing the symmetry of the intra-Community regime.
IV. Structural Principles
The common system of VAT rests upon a constellation of foundational principles that simultaneously define the obligations of taxable persons and circumscribe the permissible scope of intervention by revenue authorities:
A. Fiscal Neutrality
The principle of neutrality — arguably the lodestar of the entire VAT system — dictates that a taxable person engaged in taxed economic activity should not bear the economic burden of the tax. This principle finds its operational expression in the right to deduct input tax. The Court of Justice of the European Union (CJEU) has consistently held that any restriction upon this right must derive from an express legal basis and is to be interpreted strictly. As the Court observed in Ampliscientifica and Amplifin (C-162/07), the right of deduction constitutes an integral part of the VAT mechanism and, in principle, may not be curtailed.
B. Generality and Multi-Stage Application
VAT, by design, applies at every stage of the production and distribution chain, with exemptions constituting narrowly construed derogations requiring explicit statutory authorization. The tax is levied proportionally to the price at each successive phase, ensuring that the cumulative burden remains commensurate with the final retail value — a feature that distinguishes VAT from cascade-type turnover taxes.
C. Taxation of Consumption
The architectural logic of VAT presupposes that the tax ultimately burdens the final consumer, who — unlike active taxable persons — possesses no right of deduction. The consumer thus serves as the economic terminus of the tax, bearing its full incidence without recourse to the offset mechanism available to participants in the supply chain.
D. Avoidance of Double Taxation and Non-Taxation
The conflict-of-law provisions embedded in Directive 2006/112/EC — particularly the rules governing the place of supply — constitute a carefully calibrated system designed to prevent both the double imposition of VAT on a single transaction by two Member States and the converse phenomenon of non-taxation. These provisions function, in effect, as a jurisdictional allocation mechanism, assigning exclusive taxing rights on the basis of objective connecting factors. The same logic underpins the broader framework of double tax treaties in the field of direct taxation.
E. Prevention of Distortions of Competition
In a principle of considerable practical significance, VAT attaches to taxable transactions irrespective of compliance with formal requirements or, indeed, the legality of the underlying transaction. This rule — confirmed by the CJEU in Optigen (C-354/03) and related case law — ensures that operators conducting business outside the bounds of legality do not thereby obtain a competitive advantage over compliant market participants. The tax, in this respect, is indifferent to the moral character of the transaction.
V. Direct Effect of EU Law in the VAT Domain
A distinctive feature of the VAT system, deriving from the supremacy and direct effect doctrines of EU law, is the entitlement of taxable persons to invoke the provisions of Directive 2006/112/EC directly before national courts and administrative authorities where the Member State has failed to transpose — or has incorrectly transposed — those provisions into domestic law. The preconditions for such reliance are well established: the relevant directive provision must be unconditional and sufficiently precise.
Crucially, this entitlement operates asymmetrically. A taxable person may invoke the Directive to its advantage, but the revenue authorities may not rely upon an unimplemented directive provision to the detriment of the taxpayer — a principle sometimes characterized as the prohibition of inverse direct effect. In practical terms, this asymmetry confers upon the taxpayer a right of election: where domestic legislation conflicts with the Directive, the taxpayer may select the more favorable rule, and may do so on a transaction-by-transaction basis. This principle is closely aligned with the broader doctrine of resolving doubts in favor of the taxpayer (in dubio pro tributario).
This doctrine, originating in the foundational jurisprudence of the CJEU — Van Gend en Loos (Case 26/62), Costa v. E.N.E.L. (Case 6/64), and Ursula Becker (Case 8/81) — has been endorsed and applied by Polish administrative courts, rendering it a potent instrument for the protection of taxpayer rights in practice.
VI. VAT in Practice: Risks and Defense
The tax on goods and services is, by a considerable margin, the area in which the Polish National Revenue Administration (Krajowa Administracja Skarbowa) conducts the greatest volume of tax audits and customs-fiscal inspections. The scale of irregularities — ranging from inadvertent computational errors to sophisticated organized fraud mechanisms, including so-called carousel fraud — creates an environment in which even scrupulously compliant taxpayers may find themselves drawn into proceedings that challenge their entitlement to deduct input tax or question the correctness of the rate applied.
The consequences of identified irregularities extend well beyond the obligation to remit the tax arrears. The VAT Act provides for an additional tax liability (Articles 112b–112c), which functions, in substance, as an administrative sanction for the overstatement of input tax or the understatement of the tax obligation. Independently of this measure, the taxpayer may face exposure to fiscal criminal liability under the Fiscal Penal Code. Furthermore, in cases involving the issuance of invoices showing tax that was not due, Article 108 of the VAT Act imposes an obligation to remit the improperly invoiced amount — without any corresponding right of deduction on the part of the recipient — a provision of notable severity that has attracted sustained academic criticism. In the most egregious cases, such conduct may give rise to charges under the empty invoice provisions of the Criminal Code.
Effective defense in such proceedings demands engagement at the earliest possible stage — from the moment of the initiation of verification activities or the commencement of a formal audit. Taxpayers confronted with adverse tax decisions should be aware of their right to challenge such determinations through appeals to administrative courts and, ultimately, cassation proceedings before the Supreme Administrative Court. Kancelaria Prawna Skarbiec represents taxpayers in VAT-related disputes, combining expertise in domestic tax law with the practical application of EU regulations and CJEU jurisprudence. The firm also assists with VAT refund procedures, individual tax rulings, and strategic tax advisory for enterprises operating across multiple jurisdictions.
VII. Selected Publications by Kancelaria Skarbiec on Value Added Tax
Robert Nogacki, VAT on Transactions Between Spouses Operating Separate Businesses (9 February 2026). The operation of separate business enterprises by spouses subject to the statutory regime of community property is a pervasive feature of the Polish economic landscape. The tax classification of asset transfers between spousal enterprises, however, belongs to a category of questions in which judicial doctrine has undergone fundamental evolution in recent years — from initial denial that such transactions could attract VAT liability, through a period of doctrinal inconsistency, to the crystallization of a jurisprudential line grounded in the autonomy of tax law and the principle of pro-EU interpretation. This state of affairs demands particular vigilance from entrepreneurs in the tax planning of intra-spousal transactions.
Robert Nogacki, Denial of Input VAT Deduction as an Instrument of Collective Responsibility (29 November 2025). When, in 2005, the Polish legislature introduced Article 88(3a)(4)(a) of the VAT Act, the stated objective was the combating of carousel fraud — elaborate schemes through which organized criminal networks extracted billions of zlotys from the state budget by exploiting the structural features of the VAT system. The provision was designed to empower revenue authorities to deny input VAT deduction where an invoice “records transactions that were not performed.” Two decades on, one may observe how an instrument constructed for the suppression of tax crime has transmuted into a mechanism whose practical application more closely resembles a strategy of collective responsibility than a precisely targeted strike against actual perpetrators.
Robert Nogacki, Mere Awareness of Non-Payment Does Not Suffice: A Landmark Opinion of the CJEU Advocate General on VAT Liability (29 October 2025). On 4 September 2025, Advocate General Juliane Kokott delivered her Opinion in Case C-121/24, which may fundamentally alter the application of joint and several liability in VAT across the European Union. The case concerns the Bulgarian company Vaniz, which acquired vehicles and services from Stars International in 2017. All invoices were duly settled, input VAT properly deducted, yet the supplier — despite filing returns — failed to remit the tax. Following the supplier’s insolvency in 2019 and deregistration in 2020, the revenue authorities in 2022 imposed joint and several liability upon Vaniz for the tax left unpaid by a counterparty that had ceased to exist. The Administrative Court of Veliko Tarnovo referred the matter to the CJEU, questioning the compatibility of such practice with EU law. The Advocate General’s Opinion sets new standards that may carry significant implications for the application of Polish provisions on joint and several liability.
Robert Nogacki, A Significant Ruling for Mobile Application Developers: The CJEU Judgment in Xyrality (20 October 2025). The judgment of the Court of Justice of the European Union of 9 October 2025 in Case C-101/24 (Finanzamt Hamburg-Altona v. XYRALITY GmbH) may materially affect the tax position of mobile application developers, game creators, and other entrepreneurs supplying electronic services in the digital economy. The case addresses an ostensibly technical question with far-reaching financial consequences: who, for VAT purposes, is the actual service provider when an entrepreneur distributes applications through international digital platforms?
Robert Nogacki, Points, Vouchers, or Discounts? The CJEU Draws the Line Between Loyalty Programs and VAT Regulation (7 October 2025). Advocate General Juliane Kokott has provided definitive clarification on one of the most consequential tax questions for the retail sector in recent years. Her Opinion of 11 September 2025 in Case C-436/24 (Skatteverket v. Lyko Operations AB) has the potential to fundamentally reshape the manner in which enterprises design their loyalty programs — while demonstrating, in the process, how subtle differences in legal construction may yield diametrically opposed tax consequences.
Robert Nogacki, Principles of VAT Taxation of Virtual “Gold” in Computer Games in Light of Case C-472/24 (1 October 2025). Can one conceive of a situation in which virtual items from a computer game generate tax liabilities amounting to tens of thousands of euros? Case C-472/24 (Žaidimų valiuta MB v. Lithuanian Tax Inspectorate) demonstrates that the boundary between the virtual world and tax reality is more permeable than ever before. RuneScape — one of the oldest massively multiplayer online role-playing games, developed by the British studio Jagex in 2001 — built a virtual economy sustained for decades around gold pieces (GP), which function as a universal medium of exchange enabling players to acquire equipment, services, and access to restricted areas.
Robert Nogacki, General Principles Governing the Moment at Which VAT Liability Arises (25 November 2021). The rules determining the moment at which VAT liability arises are of cardinal importance, as they govern the period in which a given transaction must be reported. The VAT Act establishes a general rule — liability arises upon the delivery of goods or the completion of services — but simultaneously provides for a series of exceptions that materially alter the timing of recognition in the VAT return. A command of both the general rule and its derogations is indispensable for correct compliance.
Robert Nogacki, Transport of Goods Under the VAT Act: Place of Supply and Principles of Taxation (15 June 2020). The VAT Act prescribes detailed rules governing the taxation of goods transport services rendered by taxable persons. The provisions relating to the place of supply and the applicable rate are of particular complexity. A thorough understanding of these rules is a prerequisite for the correct discharge of tax obligations and may, moreover, influence the ultimate pricing of the services rendered. Entrepreneurs should bear in mind that goods transport is subject to documentary monitoring — including CMR consignment notes and export communications — on the basis of which revenue authorities may readily ascertain the applicable taxation regime.
Robert Nogacki, Criteria for VAT Treatment of Composite Supplies and Bundled Transactions (14 December 2020). Entrepreneurs engaged in market activity frequently confront the question of how to characterize — and, consequently, how to tax — commercial operations comprising multiple supplies or transactions. The stakes are considerable: whether an entrepreneur is dealing with a single composite supply, an ancillary supply lacking independent character, or several independent supplies to be assessed separately may determine entitlement to a VAT exemption or the application of a reduced rate. The Court of Justice of the European Union addressed this question in its judgment of 22 October 2020.
Robert Nogacki, Special Rules Governing the Moment at Which VAT Liability Arises (10 December 2020). While the general rule under the VAT Act provides that the tax liability arises upon the delivery of goods or the completion of services, the legislation prescribes a number of special rules constituting derogations from this principle. The moment at which the tax liability arises is a constitutive element of the VAT architecture and is indispensable for correct periodic reporting. The multiplicity of exceptions introduces additional complexity and, in many instances, may give rise to disputes with the fiscal authorities.
Robert Nogacki, VAT Margin Scheme and Tourism Services (14 September 2023). Article 306 of the EU VAT Directive is to be interpreted as permitting the application of the special preferential margin taxation procedure for tourism services to the resale of accommodation services to business operators, even where such resale is unaccompanied by any supplementary services. So held the Court of Justice of the European Union on 29 June 2023 in proceedings brought by a Polish limited liability company whose dispute with the revenue authorities had been pending since April 2017.
Robert Nogacki, Crowdfunded Services Fall Outside the Scope of VAT (24 August 2023). A court held that the crowdfunding model for the commissioning of services precludes the satisfaction of one of the essential conditions for VAT chargeability — namely, the identification of a specific beneficiary of the supply. The identification of a discernible recipient constitutes a necessary element for the classification of a transaction as a supply of services subject to VAT. So ruled the Provincial Administrative Court in Gdańsk on 11 July 2023 in the case of a Polish company engaged in the development of blockchain network infrastructure pursuant to commissions from the community associated with that network.
Robert Nogacki, Deduction of Input VAT on Alcohol Purchased for a Company Christmas Celebration (16 August 2023). Deduction of input VAT on alcohol acquired for a company Christmas celebration is permissible. The revenue authorities failed to adduce sufficient grounds to impugn the nexus between the alcohol purchased by the enterprise and the performance of taxed economic activities. Occasional expenditures on the organization of customary celebrations for employees exhibit an indirect connection with taxed activities by fostering team cohesion — so held the Provincial Administrative Court in Poznań. The court further observed that it is incumbent upon the revenue authorities to demonstrate the absence of such a connection if they wish to deny the entrepreneur the right of deduction.
Robert Nogacki, Services Performed on Movable Tangible Property Under the VAT Act (4 September 2020). International cooperation and the freedom to provide services open new possibilities for the rendering of services across jurisdictions. In pursuit of enhanced profitability, Polish taxable persons frequently undertake to provide services on materials entrusted to them or with partial utilization of their own resources. This gives rise to the question whether such arrangements constitute supplies of services or supplies of goods, and how the transaction is to be properly accounted for in terms of tax compliance.
Robert Nogacki, Non-Compliance with Contractual Terms and VAT Implications (3 September 2020). Among the transactions subject to VAT are supplies of goods and services for consideration. The tax thus presupposes, as a general matter, the existence of reciprocal performance. Claims of a compensatory or damages-like character have accordingly been excluded from the scope of the VAT Act, on the ground that such payments lack the requisite element of reciprocity — the payment arises from the occurrence of a specified event rather than in exchange for a supply. As judicial practice demonstrates, however, this demarcation is not always clear-cut. Mischaracterization in this area generates significant tax risk for both parties to a transaction. The complexities of taxing quasi-compensatory claims are not unique to the Polish jurisdiction, as illustrated by the proceedings before the Court of Justice of the European Union in Vodafone Portugal — Comunicações Pessoais SA (Case C-43/19).
Robert Nogacki, Special VAT Accounting Procedures for Tourism Services (1 September 2020). The provision of tourism services entails the incurrence of substantial costs on behalf of clients, which are subsequently recharged. As a general matter, entrepreneurs may avail themselves of the standard VAT accounting rules — deducting input tax on purchases and charging output tax on sales — with the result that VAT would be payable only on the component representing the taxable person’s remuneration, while the pass-through of costs incurred on behalf of clients would be fiscally neutral. It is precisely for this reason that the legislature elected to introduce into the VAT Act a special margin procedure for travel agencies, ensuring appropriate taxation of the value added by the intermediary.
Robert Nogacki, Special VAT Accounting Procedures for Supplies of Second-Hand Goods, Works of Art, Collectors’ Items, and Antiques (28 August 2020). Special VAT rules have been established for the supply of second-hand goods, works of art, collectors’ items, and antiques. The essence of the special procedure lies in the imposition of VAT exclusively on the margin realized upon the resale of such goods. Attention must, however, be directed to the material scope of the procedure as delineated in Article 120(1) of the VAT Act — not every category of goods qualifies for this treatment, and specific conditions governing the application of the procedure must likewise be observed.
Robert Nogacki, Further VAT Amendments: Call-Off Stock Arrangements, Intra-Community Supplies, and Chain Transactions (10 July 2019). On 24 June 2019, the Ministry of Finance published a further legislative proposal amending the VAT framework. The proposed amendments address the structure of consignment warehouse arrangements, the conditions for the zero-rating of intra-Community supplies, and the regulatory treatment of chain transactions.
Robert Nogacki, Advisory Services Under the PKD Classification and VAT Exemption (28 September 2023). Even where the statistical classification code (PKD) and the sector in which an entrepreneur operates ostensibly indicate the performance of supplies of goods or services subject to VAT, the enterprise may nevertheless qualify for the VAT exemption if it does not, in substance, carry on such activity. The classification code, in other words, yields to the economic reality of the transactions actually performed.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
