VAT Groups

With a slight delay, the VAT group legislation came into force on 1 January 2023 offering new opportunities for VAT payers in Poland.

VAT groups are optional. VAT payers are free to decide whether to create a group and who should form part of it. At the same time, however, group members must have close financial, economic and organisational ties.

This arrangement is available only to taxable persons being corporate bodies. This includes Polish companies as well as foreign companies who operate in Poland through a Polish branch.

VAT group offers certain simplifications, in particular:

• no VAT and no invoicing obligation for transaction between VAT group members;
• no split payment in transactions between VAT group members;
• VAT reporting only on the level of the VAT group, which is seen as a single VAT taxpayer (members lose their status as VAT payers);
• VAT paid by the VAT group may be lower than the sum of VAT that would be payable by all its members.

Therefore, VAT grouping is an opportunity for businesses supplying goods between subsidiaries (e.g. in the production process), services subject to split payment (e.g. construction, automotive industry) or in groups with service companies/shared service centres.

 

Key takeaway

VAT groups are a welcome way to deal with some of the constraints inherent to the Polish VAT system. They can, for instance, result in a measurable cashflow improvement.

However, not all groups of related parties meet the material conditions to form a VAT group. The creation of one single VAT payer may also pose certain challenges.

For corporate groups, it is therefore worth examining whether VAT grouping may or may not be beneficial.