A business's status under the VAT Act does not depend on whether, under the Accounting Act, it is a micro, small, medium or large entity. In VAT we apply entirely different criteria. What matters above all is the type of activities performed, the value of sales, the way the tax is settled and the nature of the transactions.
1. VAT-exempt taxpayer
One of the basic options is to make use of the subjective VAT exemption. From 1 January 2026 the sales limit entitling a business to this exemption is: 240 000 zł per year. Where the business starts during the year, the limit is set in proportion to the period of activity.
A taxpayer using the subjective exemption:
- as a rule does not add VAT to sales,
- does not deduct input VAT on purchases,
- does not file the JPK_V7 regularly,
- is obliged to keep a sales record allowing the exemption limit to be monitored.
Simply staying below 240 000 zł is not always enough, however. The act lists activities whose performance rules out the use of the subjective exemption. This concerns, among others, legal services, advisory services, jewellery services and debt collection, including factoring, as well as certain supplies of goods.
If the limit is exceeded, the exemption ceases to apply as of the transaction by which the limit was exceeded, and not only from the following month or the following year.
2. Active VAT taxpayer
An active VAT taxpayer settles the output tax on their sales and - if they meet the statutory conditions - may deduct the input VAT on purchases.
Registration is made on the VAT-R form. An active VAT taxpayer files the relevant JPK file: JPK_V7M-for monthly settlement, or JPK_V7K-if entitled to quarterly settlement.
Even with quarterly settlement, the record-keeping part of the JPK is submitted for each month. After the end of the quarter the third file also contains the declaration part for the whole quarter.
3. Small VAT taxpayer
“Small taxpayer” in VAT is a separate status. It should not be equated either with a small entity under the Accounting Act or with the VAT exemption.
A small VAT taxpayer is essentially a taxpayer whose value of sales including VAT in the previous year did not exceed the equivalent of:2 000 000 euro. For small taxpayer status in 2026, at the euro exchange rate of 1 October 2025 of 4,2586 zł, this means a limit of: 8 517 000 zł.
The act provides for a separate limit of 45 000 euro for, among others, agents, contractors and certain entities remunerated on a commission basis.
Small VAT taxpayer status gives above all the option of choosing the cash accounting scheme and - once further conditions are met – of settling VAT quarterly.
4. The cash accounting scheme
A small taxpayer may choose the cash accounting scheme.
Put very simply, it means that in a typical B2B sale to an active VAT taxpayer the tax obligation arises essentially upon receipt of payment, and not merely on the basis of the service or supply having been performed.
On the other hand, a taxpayer applying the cash accounting scheme may deduct the input VAT on purchases no earlier than in the period in which they themselves paid for the purchase.
Choosing the cash accounting scheme requires notifying the tax office.
5. Monthly or quarterly settlement?
The basic way of settling VAT is monthly settlement.
A small taxpayer may, however - once the conditions are met – use quarterly settlement. This concerns both small taxpayers applying the cash accounting scheme and small taxpayers settling VAT on general terms.
This does not mean, however, that every small taxpayer can switch to quarters straight away.
A registered active VAT taxpayer may not use quarterly settlements for the first 12 months from the month of registration. The act also provides for other cases that exclude or temporarily limit the possibility of quarterly settlements.
6. EU VAT - another, independent status
Registration for EU VAT does not mean that a new “kind” of VAT taxpayer arises in place of active or exempt status. It is an additional registration linked to specific transactions within the European Union.
Using the subjective exemption in Poland therefore does not automatically mean the absence of obligations connected with cross-border transactions.
Beware of similar-sounding limits
The term “small taxpayer” appears very often in tax legislation, but its meaning must always be established separately for the particular act.
The term small taxpayer also appears in the PIT and CIT acts. Although the basic limit of sales revenue is similar and amounts to the equivalent of 2 million euro, small taxpayer status produces different effects under each of these acts.
In VAT it is linked above all to the cash accounting scheme and the possibility of quarterly settlements, while in PIT and CIT it is linked, among others, to quarterly advances and one-off depreciation. In CIT small taxpayer status is moreover one of the conditions for applying the 9% rate, alongside a separate limit of revenue earned in the current tax year.
Correctly determining VAT taxpayer status affects, among other things, the way the tax is settled, the scope of the data and markings shown on invoices, the possibility of deducting VAT, record-keeping and reporting obligations and – where the cash accounting scheme is applied - the moment the tax obligation arises.
Fengo Sp. z o.o. | Accounting Office | Cieszyn
The article above is for information and educational purposes only. It does not constitute tax advice within the meaning of the Act of 5 July 1996 on tax advisory services. In individual cases we recommend consulting a tax adviser or the competent tax authority.
