13 April 2026

VAT Guide, part 1: the basics

Value Added Tax (VAT) is one of the most important taxes associated with running a business. This tax was introduced in 2004 and replaced the previously existing turnover tax. Furthermore, it is a harmonized tax, meaning its rules are unified across the European Union.

The EU VAT legal framework is based on the VAT Directive (Directive 2006/112/EC). The provisions set out in the VAT Directive have been incorporated into the Polish VAT Act. Furthermore, EU law and derived EU law (including the case law of the European Court of Justice) take precedence over national regulations; therefore, it is particularly important for Polish taxpayers (who also benefit from the legal protection of EU law).

Economic Activity and the VAT Taxpayer

The Value Added Tax Act (VAT Act) introduces autonomous definitions of the terms “taxpayer” and “economic activity”. These definitions operate independently of the terms contained in other legal acts, such as the Entrepreneurs’ Law Act or the Tax Ordinance Act. For this reason, the definition of economic activity should not be confused with definitions found in separate regulations.

These definitions are crucial, as they define the scope of the VAT Act and, therefore, constitute one of the fundamental elements determining whether certain activities are subject to taxation.

According to the Act, a taxpayer is any entity – regardless of its organizational or legal form (including a natural person, legal entity, or organizational unit without legal personality) – that independently conducts business activities, regardless of the purpose and results of such activities. Therefore, only an entity conducting business activities professionally and continuously is considered a VAT payer. Activities performed only occasionally, outside the scope of such activities, do not result in the entity being considered a VAT payer.

Under the VAT Act, a VAT group – a new institution established solely for VAT settlements – may also be considered a separate taxpayer. Creating a group requires meeting certain conditions, in particular, the existence of financial, economic, and organizational ties between its members.

The Act defines economic activity as any activity of producers, traders, or service providers, including entities extracting natural resources and farmers. It also includes activities involving the continuous use of goods or intangible assets for commercial purposes. It is worth noting that the definition of economic activity in the VAT Act generally corresponds to the approach adopted in the VAT Directive, despite minor linguistic differences and differences in the understanding of the concept of independent economic activity.

Active VAT Taxpayer and VAT-Exempt Taxpayer

Under the Act, a taxpayer registered for VAT purposes is referred to as an active VAT taxpayer. This is a taxpayer who performs taxable activities, pays output VAT, and does not benefit from any exemption. Registration as an active VAT taxpayer is performed via a VAT-R registration form, and the relevant head of the tax office (based on the taxpayer’s location) completes the registration after verifying the data in the application.

There is an exception to this rule – a VAT-exempt taxpayer. The following types of VAT exemptions are distinguished:

Subjective exemption – VAT exemption for an entity (taxpayer) that has not exceeded the sales limit of PLN 240,000 in the tax year (the new limit effective from 2026) – exemption pursuant to Article 113 of the VAT Act.

The regulations also specify which sales transactions do not count towards the subjective exemption limit. These include: intra-Community distance sales of goods and distance sales of imported goods (which are not taxed in Poland), sales of goods that, in accordance with income tax regulations, constitute fixed assets or intangible assets, and several categories of services, provided they are not ancillary services, including:

• real estate transactions,
• insurance and reinsurance services,
• credit and loan, surety, and guarantee services (the list of services referred to in Article 43, paragraph 1, points 7, 12, and 38-41 of the VAT Act).

Objective exemption – this exemption applies to specific activities listed in Articles 43-81 of the VAT Act. This applies to activities that are generally subject to VAT, but the legislator has provided for the exemption of these activities from the tax by operation of law.

Furthermore, the Minister of Finance may, by regulation, establish additional, specific objective VAT exemptions pursuant to Article 82, Section 3 of the VAT Act (taking into account additional conditions, e.g., EU regulations).

Taxpayers may voluntarily use the subjective VAT exemption (up to the limit) and may also voluntarily register for the VAT system. VAT. The provision of certain services or the supply of certain goods prohibits the use of the subjective exemption, for example, the supply of precious metal products, the sale of parts and accessories for motor vehicles and motorcycles.

Activities Taxed under VAT and Activities Excluded from VAT

Article 5 of the VAT Act defines the scope of the value-added tax. According to this provision, VAT is levied on:

• supply of goods for consideration,
• provision of services for consideration within the territory of Poland,
• export of goods,
• import of goods within the territory of Poland,
• Intra-Community supply of goods (ICS),
• Intra-Community acquisition of goods for consideration within the territory of Poland.

In addition, the VAT Act specifies certain activities that are exempt from VAT. Accordingly, the provisions of the VAT Act do not apply to:

• transactions involving the sale of an enterprise or an organized part of an enterprise (OPE),
• activities that cannot be the subject of a legally binding agreement – ​​this refers to illegal activities – e.g., theft, smuggling.

As defined in the VAT Act Glossary, an organized part of an enterprise is an organizationally and financially separate set of tangible and intangible assets, including liabilities, within an existing enterprise, intended to perform specific economic tasks, which could also constitute an independent enterprise performing these tasks. In other words, an OEP is a set of taxpayer assets that, after being separated from the enterprise, can still independently perform the activities for which it was created.