On the basis of VAT in accordance with Art. 2(25) of the Polish VAT Act, a small taxpayer is defined as a taxpayer of goods and services:
Whereas the conversion of amounts expressed in EUR is made in accordance with the average EUR exchange rate announced by the National Bank of Poland (NBP) on the first working day of October of the previous tax year, rounded to PLN 1,000.
The limit for benefiting from the small taxpayer status in 2024 is PLN 9,218,000.
EUR 2,000,000 × PLN 4.6091 ≈ PLN 9,218,000
The limit entitling to the status of a small taxpayer in 2024 for taxpayers providing intermediation services is PLN 207,000.
EUR 45.000 × PLN 4.6091 ≈ PLN 207.000
Pursuant to Art. 21 of the Polish VAT Act, the legislator gives small taxpayers the opportunity to choose VAT settlement according to the so-called cash method. It is a specific method in terms of the moment when tax liability arises in the case of settling output and input tax. Then the tax liability is determined by:
If part of the invoice amount is paid, it will trigger a tax liability in relation to this part.
In the cash method, the taxpayer settles the output tax upon receipt of payment from the purchaser of the goods or services. The date of delivery of goods or provision of services is not important here and it does not result in tax liability. Therefore, the taxpayer does not settle the sales invoice earlier than in JPK for the payment period.
It works very similarly for the buyer. Pursuant to Art. 86(10e), in the application of the cash method, the right to reduce the output tax due by the input tax in relation to goods and services purchased by a small taxpayer, after receiving an invoice marked with the cash method, arises no earlier than in the settlement for the period in which the taxpayer settled the payment for the purchases made.
When settling output VAT, however, it must be remembered that the output tax must be settled, regardless of the payment, when two conditions are met:
A small taxpayer wishing to apply this method of settling VAT is obliged to notify the head of the tax office by submitting the VAT-R form. The form must be submitted no later than at the end of the month preceding the period from which the cash method is to be applied. If over time the taxpayer would like to abandon this method, the regulations also provide for such a possibility, but not earlier than after 12 months of settlement applying the cash method. The VAT-R update is then submitted by the end of the quarter in which the taxpayer applied this method.
The application of the cash method also carries certain documentation obligations. Small taxpayer is obliged to:
The VAT Act also includes several cases where the cash method cannot be applied. Pursuant to Art. 21(6)(2), the cash method cannot be applied in the following situations:
The application of the cash method by a small taxpayer is voluntary; however, it is a method used by many small taxpayers due to the fact that it allows them to maintain financial liquidity. Nevertheless, they must keep the sales limit in mind, because after a month in which the limit is exceeded, they automatically lose the right to apply settlement with cash method.
Author: Karolina Rostkowska, Junior VAT Specialist in the Warsaw office of MDDP Outsourcing