3 November 2025

VAT limit – key practical issues

According to the VAT Act, VAT limit, taxpayers can choose to opt for a VAT exemption if their total sales did not exceed PLN 200,000 in the previous tax year. It’s important to note that VAT amounts are not included in this total. This is a subjective exemption outlined in Article 113(1) of the VAT Act.

Of course, the PLN 200,000 limit also excludes:

• the value of sales from intra-Community distance sales of goods (ICES),
• distance sales of imported goods that are not subject to VAT within the territory of Poland,
• supplies of goods and services for consideration that are exempt from VAT pursuant to Article 43(1),
• exempt from VAT pursuant to Article 43(1) or regulations issued pursuant to Article 82(1). 3, except:
  • Transactions related to real estate,
  • transactions related to currencies and means of payment, investment and cash management services, and services related to credits, loans, sureties, guarantees, and cash deposits, services related to financial instruments, and intermediation services related to shares in companies and entities with legal personality,
  • insurance and reinsurance services – if these activities are not ancillary transactions;
• supply of goods for consideration, which, under income tax regulations, are classified by the taxpayer as fixed assets and intangible assets subject to depreciation.

VAT Limit – private lease?

It should be noted here that services related to private leases are essentially real estate services, but they do not constitute an ancillary transaction, as referred to in Article 113, paragraph 2, item 2) of the VAT Act. Leases themselves are regulated by the objective exemptions in Article 43, paragraph 2, 1 point 36 of the VAT Act (except when it concerns the rental of real estate to businesses).

When running your own business – for example, as a sole proprietorship – you must remember to include the value of your private rental in your sales limit. It’s possible that an unaware taxpayer might forget to include the sales from their private rental property in the limit and should have been registered as an active VAT payer for several months. Consequently, tax arrears, along with default interest, may arise.

Is this the only exception?

Of course not, and this isn’t the only trap taxpayers can fall into. Users of photovoltaic panels can also fall into the VAT trap.

Essentially, the problem boils down to determining the intended purpose of a photovoltaic installation:

• If the installation is used exclusively for private purposes, this will not be treated as a business activity for VAT purposes.
• If the installation is used for mixed purposes (both for private purposes and for the sale of surplus electricity), this is treated as a supply of goods and is subject to VAT.

In the second case mentioned above, using photovoltaics for selling surplus electricity back to the grid will be subject to VAT. This means that the income from these sales will count towards the personal VAT exemption limit. Consequently, similar to private rental income, a taxpayer might unintentionally surpass the VAT exemption limit. As a result, they could find themselves subject to VAT under the general rules for several months, being treated as an active VAT taxpayer. This situation could lead to tax arrears and the accrual of default interest.

For this reason, it is crucial to carefully analyze all sources of sales and services provided that may (even in a non-obvious way) be subject to the VAT limit, because failure to comply with this obligation results not only in the loss of the right to exemption, but also in additional tax burdens.