VAT taxation of contracts for specific work in the light of the regulations
Apart from self-employed persons, the VAT taxpayer may also be persons accepting work, e.g. on the basis of a specific task contract. The act on tax on goods and services in art. 15 sec. 1 specifies taxpayers as legal persons, organizational units without legal personality and natural persons who independently carry out economic activities referred to in paragraph 1. 2, regardless of the purpose or result of such activity. Wherein paragraph 2 of the above Art. it defines economic activity as 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 use of goods or intangible assets on a continuous basis for commercial purposes. It follows from this provision that the taxpayers of VAT are self-employed persons. Therefore, VAT taxation will apply to activities performed by persons acting as entrepreneurs as part of their business. Accordingly, a specific work contract may or may not be subject to VAT, it all depends on its nature. Check what affects VAT taxation of specific work contracts!
When a specific work contract is not subject to VAT
Pursuant to Art. 13 of the Personal Income Tax Act, income from activities performed in person are considered, inter alia, revenues from the performance of services, on the basis of a mandate contract or a specific specific task contract, obtained only from:
- a natural person conducting business activity, a legal person and its organizational unit as well as an organizational unit without legal personality,
- the owner (holder) of the real estate in which the premises are rented, or the manager or administrator acting on his behalf - if the taxpayer provides these services only for the purposes related to the real estate
- with the exception of revenues obtained on the basis of contracts concluded as part of non-agricultural business activity conducted by the taxpayer.
Therefore, if a natural person who does not conduct business activity performs activities personally under a contract for specific work and this contract, in accordance with art. 15 sec. 3 includes such elements as:
- conditions for the performance of activities,
- responsibility of the ordering party for the performance of the work towards third parties,
these revenues are defined as revenues from activities performed in person and are not subject to VAT.
Meeting the three above-mentioned elements at the same time excludes such a contract from the definition of economic activity contained in the VAT Act, and thus is not subject to taxation with this tax. If a person conducting business activity concludes a contract for a specific task outside this activity, i.e. the contract does not apply to the activity performed as part of the company and at the same time meets the three conditions mentioned above, it is also not subject to VAT. Performing activities under such a contract is treated as an activity performed in person.
VAT taxation of specific work contracts
Pursuant to Art. 15 of the VAT Act, activities performed as part of business activity will be subject to taxation. Therefore, if the entrepreneur concludes a contract for a specific task as part of his business activity, the income / remuneration resulting from it will be treated as VAT turnover and thus will be subject to taxation. Agreements concerning activities falling within the scope of the conducted activity are considered to be the conclusion of a contract for a specific task as part of the conducted activity. Therefore, if the acceptance of the order, the performance of the work coincides with the subject of the activity, specified in the PKD, or is indirectly related to it, it is treated as the performance of the work as part of the activity conducted, and thus is subject to taxation. Thus, the nature of the activities performed under this contract is of significant importance, as it decides whether the contract will be treated as performed as part of the business activity or as an activity performed in person.
Contracts for specific work as part of business activity are not always subject to VAT
Natural persons running a business may take advantage of the objective or subjective VAT exemption. For example, taxpayers running a business may take advantage of the subjective exemption if their total taxable sales for the previous year did not exceed PLN 200,000. zloty. Start-ups may also benefit from this exemption by operation of law.
Therefore, if the person conducting business activity benefits from the exemption, then when taking up work on the basis of a contract for specific work, there is no obligation to tax it with VAT. However, it should be remembered that in the event of a subjective exemption, after exceeding the sales limit, you must register as an active VAT payer and tax the services / goods sold, including the aforementioned contracts for specific work.