Flat-rate farmer - VAT settlement

Service-Tax

The Act on tax on goods and services provides that the so-called a flat-rate farmer is subject to a special procedure concerning the rules of tax settlement. The introduced provisions are primarily aimed at reducing the formal burden on farmers and at the same time enabling them to deduct VAT. Below we present what the issue of taxing sales made by a flat-rate farmer looks like.

Flat-rate farmer - definition

In accordance with the provisions of the above-mentioned of the Act, a flat-rate farmer shall mean a farmer supplying agricultural products from his own agricultural activity or providing agricultural services, benefiting from tax exemption pursuant to Art. 43 sec. 1, point 3, with the exception of a farmer who is obliged under separate provisions to keep books of accounts. Under the aforementioned Art. 43 sec. 1 point 3 of the VAT Act, the supply of agricultural products from own agricultural activity, made by a flat-rate farmer and the provision of agricultural services by him, is exempt from tax.

Sales by the farmer and VAT

A flat-rate farmer is also exempt from many formal obligations provided for in the VAT tax. Namely, such a farmer is exempt from the need to issue invoices, keep records of deliveries and purchases, submit a tax declaration to the tax office and submit a registration application.

At this point, it is worth mentioning that a person running an agricultural activity has the possibility to choose whether he wants to be taxed under the special scheme or on the basis of general rules. It is also possible to choose the mixed method, in which the farmer benefits from the exemption as a flat-rate farmer and at the same time is taxed with VAT on the supply of products other than his own agricultural products and the provision of services other than agricultural services.

Example 1.

A taxpayer running a farm supplies products from his own agricultural production and at the same time provides services consisting in the repair of agricultural machinery and equipment. In this case, it may tax the entirety of its activities on general principles or use the "mixed" option, i.e. benefit from the exemption from taxation of the supply of agricultural products and tax repair services on general terms (if the turnover in the year preceding the tax year did not exceed 200,000 PLN, may also opt for a subjective exemption from VAT pursuant to Article 113 of the Act for repair services).

In a situation where the farmer resigned from the status of a flat-rate farmer and taxed the sale made on general terms, and then expressed a desire to return to the exemption provided for in Art. 43 sec. 1 point 3 of the VAT Act, he must remember that the regulations provide for a grace period, after which it is possible to return to the exemption. Well, a flat-rate farmer who resigned from the exemption he is entitled to, may only use it again after 3 years from the date of resignation. It is possible provided that the competent head of the tax office is notified in writing before the beginning of the settlement period in which the farmer will use the exemption again.

Special rules for documentation of the purchase of goods from a flat-rate farmer

The Act provides that if the buyer is an active VAT payer and the seller is a flat-rate farmer, the delivery should be documented by an invoice issued not by the seller, but by the buyer of the goods or services. Such a document is marked as "VAT RR invoice" and is issued in two copies, one of which is handed over to the flat-rate farmer.

Additionally, the VAT RR invoice should include the declaration of the supplier of agricultural products as follows: "I declare that I am a flat-rate farmer exempt from tax on goods and services pursuant to Article 43 (1) (3) of the Value Added Tax Act".

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Principle of flat-rate tax refund to flat-rate farmers

The provisions of the act stipulate that the VAT RR invoice should contain the amount of the flat-rate tax refund in the amount of 7% of the net amount due. This amount is a flat-rate tax refund for the farmer on the purchase of certain means of production for agriculture. It is paid by the buyer of agricultural products or services.

However, in relation to the buyer, the amount of the refund may be deducted input tax assuming that the statutory conditions are met. Well, a flat-rate refund increases the amount of input tax charged to the buyer in the settlement period in which the payment was made, provided that:

  1. the acquisition of agricultural products is related to a taxable supply;

  2. the payment of amounts due for agricultural products was made to the bank account of the flat-rate farmer no later than on the 14th day from the date of purchase, except when the farmer concluded an agreement with the entity purchasing agricultural products specifying a longer payment term;

  3. the document confirming the payment of amounts due for agricultural products will include the number and date of issuing the invoice confirming the purchase of these products, or the invoice confirming the purchase of agricultural products provides the identification data of the document confirming the payment.

Example 2.

An active VAT taxpayer purchased agricultural products from a flat-rate farmer on March 30 for PLN 1,500 net. The invoice issued by the buyer indicates the value of a flat-rate tax refund of 7% of the net amount, ie PLN 105. This amount is the reimbursement due to the flat-rate farmer. An active VAT payer paid the amount due in the amount of PLN 1605 to the account of the flat-rate farmer on April 6. The proof of payment included the designation of the VAT RR invoice to which it pertained. Therefore, an active VAT payer has the right to deduct the amount of input tax in the amount of PLN 105 in the tax return submitted for April.