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Poland Simplifies VAT with VAT Groups

From January 2023, a new VAT simplification will come into place in Poland. With VAT groups, closely bound together Polish businesses will be able to form VAT groups and ask to be treated as a single taxable entity for VAT purposes, thus having to submit only one VAT return per period.

The simplification, already in place in 20 European countries, was planned to enter into force already in the summer of 2022 but was delayed.

The closely bound companies will have to show strong financial, economic, and organizational links. For example, company branches will be eligible to become a Polish VAT group. Generally, financial links are reported when 50% or more shares of a group member are held by the same individual or company, while organizational links are related to joint management decisions, and economic – shared gains and economic activities.

The forming of VAT groups is not mandatory in Poland, so closely tied companies can remain separate for VAT purposes.

When collecting data for the VAT returns, companies should keep in mind that transactions that happen within the group are disregarded but should still be recorded.

It is worth mentioning that as part of a VAT group, each company becomes liable for VAT debts, and penalties are given to the group.

According to the Polish government, this simplification not only helps companies with VAT reporting but also allows them to retain turnover neutrality. For example, if a company with a VAT input surplus enters a group with a VAT output surplus, the VAT can be balanced within the group without waiting for VAT refunds.

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