Changes in VAT Exemptions for Small Businesses in the EU – What’s New in the Regulations?

The government’s draft bill amending the VAT Act and certain other laws aims to align Polish law with European Union regulations. These changes have a significant impact on small businesses that operate in other EU countries. What exactly will change for these firms?

Currently, small businesses that conduct operations in other EU countries where they do not have a registered office must register for VAT from their very first transaction. This comes with the requirement to fulfill administrative obligations, such as submitting declarations and settling VAT in each country where the tax is due. Importantly, VAT exemptions in such cases are only available to domestic companies, putting small foreign businesses at a disadvantage.

The new regulations are set to change this. According to the draft bill, small Polish businesses operating in other EU countries will be able to benefit from a simplified VAT exemption under conditions similar to those of local companies. Poland, as a member state, will handle its taxpayers’ applications for VAT exemptions in other EU countries, significantly reducing administrative burdens for small firms.

What else is changing with the new law?

The draft also includes changes to the rules regarding the place of service provision, including a special procedure for sectors such as art, collectibles, and antiques. The new regulations cover services such as cultural, educational, and entertainment services, particularly those provided virtually. VAT on such services, for example, online streaming of sporting events or concerts, will now be due in the country where the recipients of these services are located.

These changes aim to introduce fairer competition and ensure that VAT revenues go to the countries where the actual consumption of these services occurs.

When will the new regulations come into force?

The new regulations, set to take effect on January 1, 2025, are part of a broader plan to simplify VAT settlements within the European Union and are designed to support small businesses, which often bear higher administrative costs than their larger competitors.

If you want to stay up to date with such changes, follow our accounting blog and check for accounting news! We will guide you through the most important legal updates and provide detailed accounting advice.

Visit our FPD accounting office in Kielce to get professional assistance with tax settlements and running your business under the new rules.