From 1 January 2025, the new VAT exemption scheme allows small and medium-sized enterprises (SMEs) registered in Poland to benefit from VAT exemption in any other EU Member State. Similarly, an entrepreneur from another EU Member State who carries out transactions with customers from Poland and is liable to pay VAT in Poland will be able to benefit from such an exemption.

To benefit from VAT exemption in another EU Member State, the Polish taxpayer submits a notification (uprzednie powiadomienie) of the intention to benefit from VAT exemption in Poland. VAT exemption in other EU countries is available to EU SMEs if:

• their sales value in the current and previous tax year did not exceed EUR 100,000 in all 27 EU Member States,
• they do not sell goods or provide services that require mandatory VAT registration in that country,
• they do not exceed the quota thresholds set by that country,
• they meet the conditions for VAT exemption in that country.

The SME VAT exemption can also be used by entrepreneurs registered in Poland as VAT payers.

The country in which the entrepreneur wants to use the exemption must implement the SME taxation procedure. The EU platform offers a simulator to assess the use of the SME VAT exemption.

SMEs that choose VAT exemption in other countries will lose the right to deduct VAT on goods and services used in exempt supplies. Thus, if an SME purchases goods or services in its home country that are related to its supplies of goods or services exempt from tax in other Member States, it will not be able to deduct input VAT on these purchases.

An eligible SME can register for this exemption and simultaneously be registered under the OSS VAT procedure ,paying under this procedure the VAT due to Member States in which it does not use the SME procedure. A comparison of the SME exemption and the OSS VAT, as well as useful information about the new procedure, can be found in the following article.

Using the SME scheme is voluntary: a small business can choose to comply with the general VAT obligations of any EU Member State. It can choose to apply this exemption in some Member States, while at the same time applying the general VAT rules in other Member States.

General information on the application of the cross-border VAT exemption for small businesses in the EU is available via the link on the tax portal.