Key takeaways
- Starting January 2025, small Polish businesses can benefit from EU-wide VAT exemptions for cross-border activities.
- Eligible businesses must have annual sales below PLN 200,000 and register in Poland.
- Once registered, they can operate across EU borders without additional VAT registrations in each member state.
- The EU-wide exemption limit is EUR 100,000, and national limits also apply.
- Businesses must monitor turnover to remain below these thresholds and retain exemption status.
- VAT on online services (like virtual events) will be based on the consumer’s location from January 2025.
- Poland plans to raise the national VAT exemption limit from PLN 200,000 to PLN 240,000 (and potentially align with EU standards).
- The reform will simplify VAT compliance and encourage cross-border growth among small enterprises.
Starting in 2025, small businesses in Poland will be able to enjoy significant benefits when conducting cross-border activities within the European Union. By registering in Poland, these enterprises can now benefit from VAT exemptions in other EU countries, thanks to new legislative changes stemming from Council Directive (EU) 2020/285.
Registration and exemption requirements
To take advantage of these VAT exemptions, small enterprises must first register in Poland. This registration is available for businesses whose sales did not exceed PLN 200,000 in the previous year. Once registered, these enterprises can operate across EU borders without needing to register for VAT in each individual country, streamlining the process and reducing administrative burdens.
For Polish businesses to benefit from VAT exemptions in other EU countries, they must provide prior notification in Poland and obtain an identification number. This number will be used exclusively in the country of establishment, ensuring that the business can operate seamlessly across EU borders.
Limits and conditions on exemption
It's important to note that there are specific limits to these VAT exemptions. The general EU limit is set at EUR 100,000, and there are additional national limits within each member state. Exceeding these thresholds means the business will lose its VAT exemption status, requiring the careful monitoring of sales to stay within these bounds.
Procedural simplifications and impact on service provision
The upcoming changes will greatly simplify the processes for small businesses, reducing the need for multiple VAT registrations and easing the administrative burdens associated with cross-border transactions. This simplification is expected to foster a more business-friendly environment, encouraging more enterprises to expand their operations across the EU.
One notable adjustment under the new rules is how VAT will be handled for services like online events. From January 2025, VAT will be applied based on the consumer's location rather than the location of the event. This change aligns with the broader goal of creating a fair and uniform tax landscape across the EU.
Future increases in exemption limits
Looking ahead, there are proposals to increase the VAT exemption limit in Poland from PLN 200,000 to PLN 240,000. This adjustment aims to align more closely with EU standards, which allow for a maximum exemption limit of approximately PLN 365,000. Such an increase would provide even greater flexibility and benefits for small businesses in Poland.
Frequently asked questions
1. When do the new VAT exemption rules take effect?
From January 2025, under the implementation of Council Directive (EU) 2020/285.
2. Who qualifies for the VAT exemption?
Small Polish businesses with annual sales below PLN 200,000 that register in Poland.
3. What are the EU-wide limits for VAT exemption?
The general EU limit is EUR 100,000, but some countries may set lower national thresholds.
4. What are the main benefits for small businesses?
Simplified VAT compliance, no need for multiple EU VAT registrations, and reduced administrative workload.
5. How will VAT apply to online services from 2025?
VAT will be charged based on the consumer’s location, not the event’s or provider’s location.
6. Will the VAT exemption limit in Poland change?
Yes, the Polish government plans to increase the threshold from PLN 200,000 to PLN 240,000, potentially aligning with the EU’s maximum limit (~PLN 365,000).
