In public opinion, there are many myths, including that VAT is paid only by entrepreneurs. What's the truth?
What is this mysterious VAT? Starting with the name, this stands for Value Added Tax. The Polish name for VAT is a tax on goods and services which is collected at each stage of trade in goods or services. The higher the sales, the higher the VAT receipts. Currently, the standard VAT rate in Poland is 23%, but it is lower for some goods.
- Understanding what VAT is and how to deduct it is very important for both individuals and businesses. Issues related to the tax payment may seem complicated and if you are thinking about starting your own business, it is worth to consult your concerns with someone experienced - says Marcin Milczarek from ECOVIS Milczarek i Wspólnicy Kancelaria Prawna.
VAT is paid only by traders
The first myth about VAT is the widely held opinion that only entrepreneurs pay it. According to the VAT Act, the supply of goods and services for consideration is subject to taxation on the territory of the country. In other words, VAT is paid by all buyers in the country, e.g. when doing everyday shopping.
VAT is a complex tax
The opinion that VAT is a complex matter often arises. Is that so? - Taxation issues are indeed complicated, but with the support of an experienced lawyer they are easy to understand. When we are dealing with a novice entrepreneur who is not familiar with the world of taxation, it is extremely important to contact a lawyer who will shed some light on this issue. This way, a lot of trouble can be avoided. - says Marcin Milczarek from ECOVIS Milczarek i Wspólnicy Kancelaria Prawna.
VAT has no impact on social policy
Another myth is that VAT exists only in the business sphere and has no real impact on social policy. In fact, it's very big. An excellent example is the amount of payment for care services and specialist care services. Another issue is the VAT exemption of several activities that concern social life, including education, health services and culture. This is to relieve public benefit organisations from the obligation to pay VAT.
As you can see, VAT is closely linked to social life. It is also worth noting that maintaining high VAT rates leads to social stratification, as people on low incomes spend proportionally more. Therefore, while high VAT rates are an easy way to increase budgetary revenue, they also lead to a deterioration in the situation of the poorest. It should also be remembered that the tax exemption is not so beneficial at all, because in the case of exempt sales, input VAT on purchases cannot be deducted. It is deductible in income taxes.
Different VAT rates to support people in financial difficulties
Currently there are several VAT rates - 23%, 8%, 5% and 0%. Is the VAT rate differentiation intended to help people in difficulty? Turns out not necessarily. The different tax rates are designed to support certain market segments, to pursue family and education policies, and to protect the environment. It is also important to note that the rate depends mainly on the classification of the goods. And with this there are big problems, as evidenced by recent disputes about the rate of tax on hot dogs sold and stations or some goods in shops. The best solution is to reduce and harmonise rates, at least in specific product groups (e.g. all food - 8%). Maintaining many rates and unclear classifications of goods or services into particular groups leads to ambiguity and problems with tax collection and consumes time for bureaucratic and accounting procedures.
VAT is so high because it maintains the state budget
The last myth that has grown around VAT is that it is the most important source of budgetary revenue. This is true, but the proceeds of the excise tax, which is also a commonly paid tax (e.g. in the price of fuel, cigarettes or alcohol), are also important. The sum of the revenues of these two taxes gives almost ¾ of the budget revenue. The popular PIT is also important, but it should be noted that the costs of collecting this tax are very high and the tax rates arouse much controversy. VAT is less noticeable, because in Poland (unlike, for example, in the United States), the prices are already stated with VAT and the consumer does not know how much tax he pays when buying this product.
It's easy to see how important taxes are in the state budget by referring to the 2018 Budget Act: total revenue PLN 355,705,405,000, including tax revenue PLN 331,672,637,000 (93.24%). In this: VAT 166,000,000,000 (50.05%), excise 70,000,000,000 (21.11%), PIT 55,500,000,000 (16.58%), CIT 32,400,000,000 (9.775). It's easy to reach for VAT, because it's paid by practically everyone. The last seals, such as online cash registers or JPK, are just what they do to earn even more income from this tax.
It is better not to apply for a VAT refund
There is such a myth that one does not apply for a refund of overpaid VAT because it exposes oneself to fiscal control. It's true. The tax authorities check each VAT refund request to see that it is justified. Therefore, before applying for a tax refund, it is a good idea to contact an advisor to check that all settlements are in order and will not be challenged. On the other hand, routine returns, e.g. in the case of sales permanently taxed at a reduced rate or purchases of fixed assets, are carried out without too much detail.