Starting from 1 January 2010 the turnover limit of compulsory VAT registration changes from 50 000 PLN to 100 000 PLN. Taxpayers who recorded in the previous tax year the turnover not higher than 100.000 PLN may enjoy tax exemption. This limit is in force in 2010, and starting from 2011 shall increase to PLN 150.000.

Therefore, despite performing taxable activities within the framework of their business activity, they are not bound to charge VAT upon their sales. Simultaneously, however, they would not be entitled to deduct input VAT.

Place of supply

In the case of goods dispatched or transported, place of supply is defined as the place in which the goods are located immediately before their dispatch or transportation. Supply of the goods which are not transported is considered to be effected in a place where the goods are at the moment of supply. In the case of the goods installed or assembled by a supplier or for his benefit, the place of installation or assembly is considered to be the place of supply.

Following the amendment to Council Directive 2006/112/EC on the common system of value added tax, starting from January 1^st, 2010 rules for determination of a place of taxation in case of services have been changed also in Polish provisions. First of all a principle was introduced that in case of majority of services rendered by Polish taxpayers for business entities from abroad as well as in case of services purchased by Polish taxpayers from business entities from abroad - the VAT is settled by the purchaser of the service. In case of services rendered by Polish taxpayers for entities without a status of VAT taxpayers, the services as a rule are settled at the local (Polish) VAT rate.

The VAT provisions provide however for many exceptions in this respect:

1. services connected with immovable property, including the services rendered by estate agents and experts, accommodation in hotels and holiday centers and preparing and coordinating construction works, such as services of architects and of firms providing onsite supervision - the place of supply is the place where the property is situated;
2. restaurants' services and catering are subject to taxation in a place where they are actually carried out;
3. short-term rental of transport means is subject to taxation in a place where the transport means are actually placed at a customer's disposal; a short-term rental is disposing of transport means incessantly in the period of 30 days, and in case of sailing units - 90 days.

Procedure of VAT refund to foreign entities

The rule being in force from January 1^st, 2010 is that VAT is refundable to foreign entities on their application if such VAT results from invoices documenting goods or services purchased in Poland or from customs duty documents (in case of import of goods) and if these goods or services were used by the foreign entities to undertake activities authorizing to decrease output VAT by the amount of input VAT on the territory of the State in which they settle VAT or a tax of a similar nature. It should be underlined that non-EU taxpayers are eligible for VAT refund subject to reciprocity rule.

The procedure of VAT refund to foreign entities is set out in the Regulation of the Minister of Finance dated of 24 December 2009 (hereinafter referred to as "the Regulation"). Pursuant to this Regulation in order to obtain VAT refund the following conditions have to be met jointly within the period covered by the application:

• the applicant shall not have its place of residence, registered seat nor permanent place of activity in Poland,
• the applicant shall be registered as VAT (value added tax) or similar tax taxpayers in the country of its residence, registered seat or permanent place of activity,
• the applicant shall not be registered as VAT taxpayer in Poland,
• the applicant shall not perform within the territory of Poland activities being subject to Polish VAT (apart from certain activities, mentioned in the Regulation, including, among others, transactions settled pursuant to reverse charge rule).

An entity authorized to apply for VAT refund, having its seat or residence in other than Poland EU member state, submits the application to the Second Tax Office Warszawa Śródmieście via electronic communication through tax authorities in its state.

An entity from another country (from outside EU) submits an application in writing on a form envisaged in the Regulation directly to the Second Tax Office Warszawa Śródmieście.

The application for VAT refund may refer to periods not shorter than three months and not longer than one tax year. The application concerning any given year has to be filed until 30 September of the following year. The amount of VAT to be refunded may not generally be lower than the equivalent in PLN of EUR 400 (if the application refers to a period shorter than one tax year but not shorter than 3 months) or EUR 50 (if the application refers to the whole tax year or a period shorter than 3 last months of the year). The application has to be prepared in the Polish language. The application should be filed with the Head of the Second Tax Office - Warszawa Śródmieście along with the following:

a)       in case of applications submitted electronically:

• information specified in Annex 1 to the Regulation,
• copies of invoices or customs duty documents, if the tax base specified on the invoice or the customs duty document is higher than equivalent in PLN of EUR 1.000 or the tax base specified on the invoice documenting purchase of fuel is not lower than EUR 250,

b)       in case of applications in writing on the form envisaged in the Annex 2 to the Regulation

• originals of VAT invoices and/or customs documents, from which VAT refund results, and
• the original of a certificate (hereinafter referred to as "the Certificate") confirming that the entity applying for VAT refund is registered as the VAT taxpayer in the country of residence, registered seat or permanent place of activity.

The Certificate should be issued by tax authorities of the country of residence, registered seat or permanent place of activity of the applicant. The form of the Certificate constitutes an appendix to the Regulation. If local tax authorities use different forms of certificates they are generally accepted, if these forms contain all information required by the Polish form.

According to the Regulation the VAT should be refunded within four months from the date of filing the application. However the above mentioned term may be extended if the application requires additional verification.

The amount of VAT refunded is transferred in PLN to the bank account of the applicant. If the VAT is transferred to an account opened in a foreign bank, the Polish tax authorities do not bear banking charges related to the transfer.

Terms of submitting the VAT-UE declarations
From the 1st of January, there are new terms of application the VAT-UE (Unia Europejska) declarations. The declarations should be submitted till the 15th day of each month (or quarter).

Taxpayer will have rights to submit quarterly declarations, if their value:

• intra-Community supply of goods or a supply in simplified transactions, without the value added tax, didn't exceed the amount 250000 PLN in any of last 4^th quarters. But the act enters the interim period -from 1^st of January 2010 till 31^st of December 2011, when the amount of limit will be 500000 PLN;
• intra-Community acquisition of goods for the particular quarter didn't exceed 50 000 PLN.