Lowering VAT rates - how to take advantage of preferential VAT rates?

Service-Tax

Pursuant to the Regulation of the Minister of Finance of March 25, 2020 on goods and services for which the VAT rate is reduced, and the conditions for applying the reduced rates, preferences have been introduced in the application of VAT rates. The reduction of VAT rates is mostly limited in time, so it is worth familiarizing yourself with the rules and dates of applying reduced VAT rates.

Reduction of VAT rates, i.e. 8%, for the supply of biocidal products used for health protection

From July 1, 2020, in connection with the change in the content of Annex 3 to the VAT Act, pursuant to item 15 bactericides, fungicides and virucides that are used to protect health will be subject to the 8% rate, however, due to the epidemiological situation in the country, the reduced rate for these goods can be applied from March 1, 2020.

However, in order for disinfectants to be covered by the 8% VAT rate, strictly defined conditions must be met:

  • the preparation must be included (when handed over by 31 June) in the PKWiU 2008 classification under the symbol ex 20.20.14.0 - disinfectants (the condition does not apply from 1 July);

  • the preparation must be a disinfectant with bactericidal, fungicidal and virucidal properties;

  • the preparation must only be used in health protection;

  • a provisional authorization or entry in the Register for Biocidal Products must be issued to the preparation.

If at least one of the conditions is not met, the taxpayer is obliged to apply the 23% rate.

From July 1, 2020, due to the elimination of the PKWiU classification, all products meeting the conditions regarding properties, intended use and permits will be eligible for the 8% rate.

Lowering VAT rates to 0% for selected business transactions

0% VAT for the supply of medicinal products imported to Poland

Products imported from abroad, defined as medicinal products, which were to be used to conduct therapies outside the country, but due to the situation caused by the coronavirus epidemic, had to be brought to Poland, they were subject to a preferential 0% rate.

This preference can be used from April 25, 2020 until the announced epidemiological status is canceled.

To apply the 0% rate, the preferential products must have a permit issued by the Council of the European Union or the European Commission and be admitted to trading in the territory of the Republic of Poland in accordance with the provisions of the Pharmaceutical Law Act of September 6, 2001. These products may be subject to the rate 0% if they jointly meet the following conditions:

  • have previously been the subject of an import of goods into the territory of the country or of an intra-Community acquisition of goods for consideration within the territory of the country,

  • their purchase is financed from funds from public collections organized by public benefit organizations,

  • they are used for a therapy that has become impossible or excessively difficult to carry out outside the Republic of Poland due to restrictions imposed as a result of the epidemic state announced in connection with SARS-CoV-2 virus infections.

The taxpayer should also have documents confirming that the purchase of products was financed with funds obtained from public collection (confirmation from a public benefit organization) and that they will be used for therapies carried out in the country (confirmation from the buyer of the goods).

0% VAT for donations of health-related goods

Many entrepreneurs decided to support units working to prevent and combat infections and the effects of an infectious disease caused by coronavirus, providing them with necessary goods in the form of a donation.

In the case of donations made from February 1, 2020 to August 31, 2020 to: the Material Reserves Agency, the Central Sanitary and Anti-Epidemic Reserves Base and unnamed hospitals, taxpayers may apply a 0% VAT rate. However, for other entities such as:

  • entities performing medical activities entered into the list referred to in Art. 7 sec. 1 so-called the COVID Act - hospitals, entities providing services as part of medical rescue or medical transport, which have been designated for activities in the field of combating COVID-19,

  • specific social welfare units - support centers, homes for mothers with underage children and pregnant women, shelters for the homeless, including those with care services, night shelters,

- 0% VAT rate can be applied to donations made from April 25, 2020 to August 31, 2020.

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The 0% VAT rate is applicable when the subject of the donation are items listed in the regulation:

  • medical devices and in vitro diagnostic medical devices,

  • laboratory glass and laboratory apparatus,

  • medicinal products and active substances,

  • biocidal products - only disinfectants,

  • specialized diagnostic tests for the analysis and detection of pathogens in the human body, water, air and soil,

  • personal protective equipment - only masks, face shields / glasses, goggles, safety glasses, coveralls, shoe covers, caps and gloves.

To apply the reduced tax rate, it is necessary to conclude a written donation agreement between the taxpayer who delivers the goods and the recipient.

0% VAT for free supplies to entities providing education

The 0% rate also covers free deliveries (donations) of portable computers, such as laptops and tablets, made to entities such as:

  • educational institutions - e.g. schools and kindergartens, universities, care and educational institutions,

  • humanitarian, charitable or educational organizations and the National Educational Network for further transfer to educational institutions free of charge,

  • authorities running a school or facility - e.g. a commune, poviat, ministers, legal persons and natural persons who may run schools and education system institutions on the basis of the provisions of the Educational Law for further transfer to educational institutions, free of charge.

In order to apply the 0% VAT rate, it is necessary to conclude a written donation agreement between the taxpayer and one of the above-mentioned entities for which computer equipment is donated, more about it in the article: Deduction of a donation during the year - expansion of possibilities thanks to Shield 4.0!

The above form of assistance is intended to support educational institutions which, due to the prevailing situation in the country, have been forced to conduct online learning. Although Polish law has long been a provision allowing the use of the 0% VAT rate in the case of supplies of equipment to educational institutions, in this case, taxpayers are subject to much smaller restrictions. Because according to Art. 83 sec. 1 point 26 of the VAT Act, in order to be able to apply the 0% VAT rate, it was additionally necessary to have an appropriate order for these goods and notification of the event, along with a delivery contract to the appropriate tax office. Currently, it is enough to conclude a donation agreement with the entity for which the delivery is made.