Running your own business is not just about responsibility but, above all, about ensuring compliance with legal regulations. There are no exceptions here – the rules apply to everyone, though usually on different scales. Therefore, it’s important to understand the key aspects that can impact the finances and organization of your business.
Below, you’ll find the most important information every entrepreneur should know. While each situation requires an individual approach, these matters are fundamental.
1. Cash payment limit
Entrepreneurs and consumers can make payments in both cash and non-cash forms. However, the choice of method depends on the value of the transaction, as specific legal limits apply.
One of the key regulations that entrepreneurs should be particularly aware of is the cash payment limit in transactions between businesses.
The maximum amount for such a payment is 15 000 PLN gross. If the total value of the transaction exceeds this threshold, the payment must be made via bank transfer.
It is important to remember that the limit applies to the total value of the transaction, not to individual installments or advance payments. This means that in the case of installment payments, if the total amount exceeds 15 000 PLN, all payments must be made in a non-cash form.
What if you do not respect the limit?
Violating this limit can result in serious tax consequences. If a payment is made in cash for an invoice exceeding 15 000 PLN, even partially, the consequences apply to the entire transaction. This may lead to a reduction in deductible expenses. If a correction is not possible, you have to increase the taxable income base. This is why it is essential to process every payment above this threshold using non-cash methods.
2. White list of VAT taxpayers
Verifying contractors has become a key part of doing business, especially in the context of VAT settlements. This is hardly surprising, as The white list of VAT taxpayers is an official register that allows you to check whether your contractor is an active VAT taxpayer.
Why is it so important and what will you find there?
The register contains a number of relevant data, such as:
- Contractor status – whether they are an active VAT taxpayer or benefit from an exemption.
- Reasons for refusal of registration or removal from the VAT taxpayer register.
- Entrepreneur’s bank accounts – only business accounts of VAT-registered taxpayers.
Please note that only business bank accounts of registered VAT taxpayers are included in the white list. This also means that entrepreneurs who are VAT taxpayers are required to maintain a business account.
However, if an entity has been removed from the VAT register, denied registration, or is not registered as a VAT taxpayer, its bank account – even a business one – will not appear in the register. In such cases, the entrepreneur is not required to have a business account.
Be careful with larger transactions
Special attention should be paid to transfers exceeding 15 000 PLN. If the payment is made to an account that is not on the white list of VAT taxpayers, the entrepreneur loses the ability to include such an expense as a tax-deductible cost. Additionally, they risk joint liability for the contractor’s unpaid VAT.
What about mistakes?
If a payment is made to an incorrect account, the situation can be rectified. Simply report the incident to the tax office within 7 days of the transfer date using the ZAW-NR form. This is the only way to avoid negative consequences.
3. Split payment mechanism
The split payment mechanism (,,MPP” in Polish), is mandatory in certain cases. Those are transactions involving so-called “sensitive” goods (e.g. electronics, steel, fuel) and invoices with a gross value of more than 15 000 PLN.
It is about splitting the payment from the invoice, meaning:
- The VAT amount goes to the contractor’s dedicated VAT account.
- The remaining amount (net value) is transferred to their standard business account.
The VAT account is automatically created by the bank as an additional account linked to the entrepreneur’s primary account. This means there is no need to set it up manually.
Applies only to:
- VAT taxpayers – both sellers and payers.
- Transactions made via bank transfer in Polish zloty (PLN).
This obligation applies to all entrepreneurs registered as VAT payers in Poland.
Note that the split payment mechanism also does not apply when you receive a so-called ,,pro forma” invoice before the delivery of goods or the provision of services. A ,,pro forma” invoice is not considered as an accounting document. It means it cannot be used to make a split payment.
The next point is that, depending on the type of transaction and its value, split payment can be voluntary or mandatory.
Types of MPPs
Voluntary – If you are a VAT taxpayer, you can choose to apply the split payment mechanism when purchasing goods or services from other companies.
You can apply MPP to all invoices or only to selected ones. The remaining payments can be settled traditionally, without separating the VAT from the net amount.
Remember that it is the buyer who decides whether to apply split payment.
Mandatory – As previously mentioned, VAT taxpayers are required to apply this mechanism when two conditions are met:
- They sell “sensitive” goods or services, meaning those listed in Annex 15 of the VAT Act.
- The total amount of the invoice (gross value) exceeds 15 000 PLN.
The seller, when issuing an invoice that meets these two conditions, must include the note “split payment mechanism” on the invoice.
The buyer is then required to apply the split payment mechanism when paying the invoice.
4. VAT account
In short, it is a type of settlement account in PLN with limited access to the funds held in it. It is used for tax payments and payments under the split payment mechanism. It is linked to at least one regular account in PLN.
Entrepreneurs carrying out Annex 15 transactions must have a business bank account. The bank is required to automatically open a VAT account for each such account, regardless of whether the taxpayer is an active VAT payer or benefits from an exemption.
A VAT account is created for business accounts only – it cannot be opened for a personal account….
When and how can you transfer money from a VAT account?
If you are unable to use the funds in your VAT account for settlements with the tax office, ZUS, or customs duties, you can submit a free application to the tax office to release these funds and transfer them to your primary account. In the application, you must specify the amount you wish to withdraw from the VAT account.
Once approval is granted, the funds from the VAT account can be transferred to the business account. Then they can be used without any restrictions.
Application process and decision
- Submitting the application: Directly to the tax office, specifying the amount you wish to transfer to your business account.
- Decision time: The tax office has 60 days to review the application. If approval is granted, both you and your bank will receive an official decision.
- Transfer of funds: After receiving the decision, the bank will promptly transfer the funds from the VAT account to your regular account.
Refusal
You will receive it in the case of:
- having tax arrears (up to the amount of the arrears),
- reasonable concern that tax obligations will not be fulfilled or that additional liabilities may arise.
Using a VAT account is also a benefit
- Faster VAT refund if we choose a refund to the VAT account.
- Protection from tax sanctions.
- No additional interest – no accrual of interest at 150% in the case of VAT arrears.
- Protection against enforcement – funds in the VAT account are protected from seizure, providing the entrepreneur with additional security.
For companies, the split payment mechanism provides significant protection against joint liability for VAT. Especially in the case of mistakes on the contractor’s side. It also ensures that the funds accumulated in the VAT account will be used exclusively for purposes related to this tax.
5. Debt Relief
Every entrepreneur is familiar with the situation where a contractor does not pay on time. Although this can be frustrating, there is a partial solution in the form of this relief. It allows you to recover VAT as well as PIT/CIT on unpaid invoices.
Both PIT and CIT taxpayers and active VAT taxpayers can take advantage of this solution.
In order to benefit from this relief, at least 90 days must pass from the payment due date for the invoice. Also, the debt must not have been sold during this period.
VAT settlement
It is necessary to make a correction of the output tax in the VAT return for the period in which 90 days have passed since the payment due date for the invoice.
The conditions are:
1. You must be an active VAT taxpayer on the day the declaration is submitted.
2. No more than 3 years have passed since the invoice was issued.
PIT and CIT
The mechanism here is similar. You can reduce the tax base by unpaid invoices that are unpaid for 90 days. The relief is included in the annual tax return.
The conditions are:
1. The debtor cannot be undergoing restructuring, bankruptcy, or liquidation proceedings.
2. No more than 2 years have passed since the invoice was issued.
3. The invoice must be issued by taxpayers whose incomes are taxed in Poland.
What to do if YOU are the debtor?
In this case, you are required to correct the VAT and income tax if 90 days have passed since the payment due date. Exception is the situation where the payment is settled by the end of the month in which the 90 days have passed.
It is necessary to reduce the deductible expenses by the value of the unpaid invoice. If the debt is settled later, it is possible to re-include it as an expense.
In the case of PIT and CIT, the debtor should increase the tax base by the amount of the unpaid invoices, bills or contracts.
In the case of VAT, the debtor is required to adjust the deducted tax amount from the invoice in the settlement for the period in which 90 days have passed since the payment became due.
It is worth remembering that delays in payments not only carry tax risks. They may also lead to a loss of trust on the part of contractors, which may consequently negatively affect further cooperation.
6. Import of services from the EU – social media
Entrepreneurs should exercise particular caution when purchasing services from contractors in the European Union, such as advertising on Facebook. Many entrepreneurs use the platform to advertise, taking advantage of its wide reach. However, not all of them know how to properly settle for the purchase of the advertising service.
VAT-UE when purchasing advertising services
Do you purchase ads on social media platforms like Facebook? You are engaging in the import of services, which is a transaction settled outside of Poland! According to regulations, before making the purchase, you must register as an EU VAT taxpayer and obtain a VAT-UE number. This ensures that the service provider (e.g., Facebook) recognizes your company as an active VAT taxpayer.
How to obtain such a VAT-UE number?
To register as an EU taxpayer, you must submit the VAT-R form, filling out part C.3. The new VAT-UE number consists of the NIP number with the prefix “PL”. It should be used for transactions with companies in the EU.
The obligation to have a VAT-UE number also applies to VAT-exempt companies, i.e. those that are not VAT payers.
Settlement
Having the status of an EU taxpayer, you can safely buy advertising and services from outside Poland. If you are an active VAT taxpayer, the settlement will be neutral – you will settle both output and input tax.
However, it is worth remembering, that if you are not a VAT taxpayer, after registering as an EU taxpayer, you will report the import of services on the VAT-9M form. However, you will need to pay 23% VAT without the possibility of deduction. This amount will become an expense that you can deduct from your income in the month of payment.
This form must be submitted and paid by the 25th day of the month following the month in which the tax liability was incurred.
Invoice currency when importing services
Some social media platforms settle in PLN, which simplifies the procedures. For other services, the amounts are converted into Polish zloty (PLN). You must use the average exchange rate of the National Bank of Poland (NBP) or the European Central Bank (ECB). This must apply on the day preceding the tax liability date.
It is worth noting that Facebook also has a headquarters in Poland. It may happen that the invoice is issued in PLN and taxed with the domestic VAT rate of 23%. In this case, the invoice is treated like a standard domestic invoice. It means it can be included in deductible expenses and recorded in the VAT purchase register (for VAT taxpayers).
7. Sales to individuals and the obligation to use a cash register
When selling goods or services to individuals, entrepreneurs are required to use a cash register. Exemption from this obligation is granted only in specific cases.
When should you be concerned about it?
If the goods you sell are included in the Regulation, the obligation to have a cash register applies to you without exception. No exemption or deviation changes this.
However, if you are not on this list, a revenue limit of 20 000 PLN per year applies. It means you do not have to use a cash register before exceeding this threshold.
Once the threshold is exceeded, you have two months to purchase a cash register.
Moreover, there are conditions that exempt you from the obligation to use a cash register, regardless of your revenues. It’s enough that one of the following points applies to you:
- You sell goods or provide services exclusively to other entrepreneurs, including local and state government authorities.
- You receive payments only via bank transfer.
- You conduct mail-order sales through the internet.
So, to sum up now
Seemingly insignificant actions can sometimes lead to serious and irreversible consequences. Nothing is more frustrating than a mistake caused by a lack of knowledge that could have been avoided. We understand this perfectly. There is no shortage of regulations, and as entrepreneurs, we are, after all, just humans. That’s why it’s always worth consulting before making a decision. One that, in the end, could cost us a lot if made too hastily.
To stay up to date with regulations and valuable tips, be sure to regularly visit our blog and follow our social media profiles. We always aim to present knowledge in a concise way to make it as easy to absorb as possible.
We are also here to help you solve any accounting-related issues. And if the topic goes beyond our expertise, we will gladly recommend the right specialist. As an accounting company, we will take care of all the formalities that stand in your way. It is very important so you can fully focus on what matters most – the growth of your business.
