DEFINITION OF A TAXPAYER UNDER THE VAT ACT - SERVICE-TAX

Definition of a taxpayer in the VAT Act

Pursuant to Art. 15 of the Value Added Tax Act, the group of VAT taxpayers includes legal persons, organizational units without legal personality and natural persons who conduct their own business activity. It is worth remembering that the purpose, result, nature or legal form of the conducted activity are irrelevant to Polish law. Therefore, a taxpayer can be both a service company and a charitable foundation. The classification should depend on 2 factors: running a business and carrying it out independently.

What is economic activity?

In order to classify a taxpayer, it is important to refer to the concept of economic activity, which is understood to mean any activity of producers, traders or service providers, including natural resource extractors and farmers, as well as the activity of freelancers. Economic activity includes, in particular, activities consisting in the continuous use of goods or intangible assets for commercial purposes (Article 15 (2) of the Value Added Tax Act). In this case, an important condition is the intention to perform the indicated activities on a permanent basis. A person whose action is incidental or performed a one-time event is not subject to the provisions of the above-mentioned the law. As an example not classifying as a taxpayer, one can indicate the purchase of a camera and then selling it after a few years. On the other hand, when a person intended to run a business continuously, but provided the service only once - it falls under the definition of a taxpayer. The given interpretation results from the intention to conduct activities of a continuous nature.

Activity performed independently

Another criterion is the independent performance of activities, which excludes persons working under an employment contract, homework, cooperative employment relationship, service relationship and personal activity (e.g. mandate contract). The concept of independence means the ability to conduct self-employment and take economic risk. It should also be noted that activities for the benefit of third parties are not excluded.

In addition, there are legal persons, organizational units without legal personality and natural persons as VAT taxpayers:

non-taxable persons referred to in art. 15, carrying out occasional intra-Community supplies of new means of transport,

making intra-Community acquisitions of goods,

obligated to pay customs duty (the obligation also applies to imported items exempt from customs duties or the application of preferential rates),

purchasing goods or services that meet the conditions specified in Article 17 of the Value Added Tax Act.

Subject and object exemptions from VAT

The VAT Act also provides for the possibility of exemption from the tax obligation. On this basis, there are two types of exemptions: subjective and objective.

Taxpayers whose sales in the previous year did not exceed PLN 150,000 in total are entitled to a subjective exemption. Entities commencing business activities (performing activities specified in Article 5 of the Act) may also benefit from this convenience. In this case, their forecast sales may not exceed the amount of PLN 150,000, proportionally to the period of the conducted activity. Exempt taxpayers are not required to submit a registration application. However, they often decide to submit a VAT-R declaration, because a given solution is more profitable for them and carries additional rights (e.g. the possibility of issuing invoices).

Article 43 of the Act, in the wording in force from 1 January 2014, provides a list of activities that are absolutely tax exempt. Among them, the following should be mentioned:

the supply of goods used solely for the purposes of tax-exempt activities, if the person delivering them was not entitled to reduce the amount of tax due by the amount of input tax due to the acquisition, import or production of these goods,

the supply of agricultural products from own activity carried out by a flat-rate farmer,

universal postal services, provided by the operator obliged to provide such services, and the delivery of goods closely related to these services

compulsory social security services,

foreign language teaching services.

For the purposes of determining the taxpayer's status for Polish law, registration with the relevant tax office is not required. The status of the entity conducting economic activity is also irrelevant, as it can be either a natural person, a legal person or a legal unit without legal personality. For this reason, some entities are not aware that they are taxpayers in the light of the VAT Act. The key to determining the status of a taxpayer is meeting the conditions set out in the Act: conducting business activity, regardless of the purpose and result, and carrying it out independently. However, it is worth remembering that even if the entity meets the above conditions, it may be entitled to benefit from subjective or objective exemptions.