Newsy

B2B arrangements under tax scrutiny: how Poland’s UD116 bill could change the tax treatment of entrepreneurs

Poland’s draft bill UD116 could significantly change the tax treatment of certain entrepreneurs operating under B2B arrangements. The proposed rules would not abolish self-employment or Poland’s lump-sum tax regime on recorded revenue. However, they are intended to reduce the tax attractiveness of certain structures, particularly transactions with related parties, service businesses operating without employees, and the use of the Polish IP Box regime.

The proposed tax changes form part of a broader regulatory focus in Poland on how B2B contracts are used in practice. Since 8 July 2026, new rules have also been in force strengthening the powers of the Polish National Labour Inspectorate in relation to civil-law contracts and B2B arrangements that, in practice, replace an employment relationship. The labour inspection reform and the UD116 bill concern different areas of law, but together they indicate that both the actual manner in which cooperation is performed and the tax structure applied to it will be subject to closer scrutiny.

The UD116 bill is currently at the government legislative stage. According to the Polish government’s legislative agenda, its adoption by the Council of Ministers is planned for the third quarter of 2026. The final wording of the proposed rules may therefore still change.

Services provided to related parties – 17% lump-sum tax

One of the most important proposals is the introduction of a 17% lump-sum tax rate on revenue from services provided to a related party.

The change may primarily affect shareholders who also operate as sole traders and invoice their own companies. In practice, this often concerns fees for advisory, IT, marketing, administrative, commercial or management-related services.

Providing services to one’s own company is not prohibited under Polish law. However, the Polish Ministry of Finance has raised concerns about arrangements in which B2B remuneration may, in economic terms, replace the distribution of dividends.

In Poland, dividends are subject to 19% personal income tax and are not tax-deductible for the company. By contrast, where services are invoiced under a B2B arrangement, the company may generally recognise the remuneration as a tax-deductible cost, while the shareholder may tax the revenue under the lump-sum regime.

Under the proposed rules, such services would be taxed at 17% of revenue. This means that tax would be calculated on the gross value of the invoices, without any deduction for business expenses.

This would not automatically result in every agreement between a shareholder and their company being challenged. It would, however, be necessary to determine whether the parties qualify as related parties under Polish tax law and whether the service falls within the scope of the new rate.

Letting property to one’s own company

The proposed changes would also cover rental and lease income received from related parties. This may include situations in which a shareholder lets office space, a warehouse, an industrial facility or another property to their own company.

Under the current Polish rules, private rental income is subject to lump-sum tax at:

8.5% on annual revenue of up to PLN 100,000, and

12.5% on the excess above PLN 100,000.

According to the version of the proposal currently being discussed, where property is let to a related party, the rate applicable to revenue exceeding PLN 100,000 would increase to 15%.

The purpose of the change is to limit structures in which the company deducts rent paid to the shareholder as a business expense, while the shareholder taxes the corresponding income under the lump-sum regime.

The letting arrangement itself would remain permissible, but its overall tax efficiency could be reduced.

Entrepreneurs should also bear in mind that a related party is not limited to a company in which the landlord directly holds shares. Related-party status may also arise from indirect control, significant influence or family relationships.

Trademarks and other intellectual property rights – 17% rate

The higher lump-sum rate would also apply to certain income from rental, lease or similar agreements involving intellectual property rights where the agreement is concluded with a related party.

In practice, this may concern arrangements in which a shareholder owns a trademark, business name, logo or another proprietary right and licenses or otherwise makes it available to their company in return for payment.

The company may recognise the payment for the use of the right as a tax-deductible expense, while the shareholder receives remuneration taxed under the lump-sum regime.

The proposed tax rate for this type of income is 17%. The change could therefore reduce the attractiveness of structures in which licence fees or payments for the use of intellectual property also serve as a means of transferring funds from the company to its shareholder.

Higher rate for service businesses without employees

Another significant change may affect entrepreneurs providing services that are currently subject to Poland’s 8.5% lump-sum tax rate.

Under the version of the bill currently being discussed, an entrepreneur who does not employ at least one full-time employee throughout the relevant tax year would have to apply a 15% rate to the portion of annual revenue exceeding PLN 100,000. Revenue up to that threshold would continue to be taxed at 8.5%.

This may be particularly relevant for sole traders whose annual revenue exceeds PLN 100,000 but who do not require employees due to the nature of their activities. Potentially affected groups may include consultants, trainers, marketing specialists and other professionals who provide services independently.

The right to retain the lower rate would be linked to maintaining the required level of employment throughout the period in which the business is operated during the relevant tax year.

If the entrepreneur ceased to employ the required person during the year, it might be necessary to recalculate the lump-sum tax due on revenue earned from the beginning of that year.

IP Box subject to an employment requirement

One of the most significant proposed changes for Poland’s technology sector concerns access to the Polish IP Box regime.

Under the current rules, qualifying income from specified intellectual property rights may be taxed at a preferential rate of 5%. The regime is commonly used by software developers operating as sole traders who independently create or develop software as part of research and development activities.

The UD116 proposal would make access to the IP Box regime conditional on employing at least three individuals who are not related to the taxpayer.

As a result, actually carrying out research and development, creating qualifying intellectual property and maintaining the required tax records may no longer be sufficient to apply the 5% rate.

In practice, the change could exclude a significant number of independent specialists from the preferential regime.

IP Box income to be included in the solidarity levy base

UD116 also provides for IP Box income to be included in the tax base used to calculate Poland’s solidarity levy.

The solidarity levy is charged at 4% on the portion of certain categories of income exceeding PLN 1 million. Following the proposed changes, income taxed under the 5% IP Box rate would also be taken into account when determining whether the taxpayer has exceeded that threshold.

The bill is also intended to confirm that the solidarity levy base may be reduced by tax losses carried forward from previous years, but only where those losses arise from the same source of income included in the levy calculation.

Other deductions and tax reliefs available under the Polish personal income tax system would not automatically reduce the solidarity levy base.

Cars purchased after leasing – three-year period before a tax-free sale

The bill also addresses a common arrangement involving vehicles purchased after the end of an operating lease and subsequently transferred to close family members.

The proposed change concerns situations in which an entrepreneur purchases a vehicle into their private assets, gives it to a close family member and the recipient subsequently sells it.

Under the proposed rules, the sale would be subject to personal income tax if it takes place within three years of the recipient acquiring the vehicle.

The gift itself may still qualify for an exemption from Polish inheritance and gift tax, provided that the relevant statutory conditions are met. However, the possibility of quickly selling the vehicle without personal income tax would be restricted.

What does UD116 mean for entrepreneurs?

The UD116 bill does not signal the end of the B2B model in Poland. It could, however, materially affect the tax efficiency of certain business structures.

The proposals should be reviewed in particular by individuals who:

invoice their own company or another related entity,

let property to their own company,

make trademarks or other intellectual property rights available to related parties,

apply the 8.5% lump-sum rate without employing staff, or

benefit from the Polish IP Box regime.

As the bill has not yet been adopted by the Polish Council of Ministers, it is too early to implement definitive changes to existing business structures. Nevertheless, taxpayers should already consider estimating the potential increase in their tax burden and preparing alternative tax scenarios before the beginning of 2027.

Particular attention should be paid to the final scope of services subject to the 17% rate, the detailed construction of the employment requirements and the rules used to determine whether entities are related parties for Polish tax purposes.

Zamknij

MDR amendment signed into law: how will Polish tax scheme reporting change from 1 October 2026?

The Act of 29 May 2026 amending the Polish Tax Ordinance and certain other acts, signed by the President of Poland, introduces significant changes to the Polish rules on reporting tax schemes, commonly referred to as MDR, or Mandatory Disclosure Rules. The new MDR provisions are expected to enter into force on 1 October 2026 and will substantially narrow the scope of obligations which, since 2019, have been one of the more demanding elements of tax compliance in Poland.

The amendment does not abolish MDR reporting altogether. However, the Polish legislator is moving away from solutions that went beyond the EU standard resulting from the DAC6 Directive. In practice, this means, above all, abolishing the obligation to report domestic tax schemes and focusing the reporting regime on cross-border arrangements.

For many businesses, this will be a genuine simplification. Until now, Polish MDR rules have also covered arrangements involving only Polish taxpayers and the Polish tax jurisdiction. As a result, MDR analyses were required not only for complex international structures, but also for many business activities carried out entirely in Poland. Following the changes, this scope will be significantly reduced.

Key changes to Polish MDR rules

The amendment introduces several groups of changes which, taken together, reshape the existing reporting model. The most important changes include:

abolition of the obligation to report domestic tax schemes;
limitation of reporting obligations, in principle, to cross-border tax schemes;
amendments to the definitions of key terms, including tax scheme, arrangement, promoter, user, hallmarks and the main benefit test;
removal of the so-called other specific hallmarks;
exclusion of arrangements concerning VAT and excise duty from the scope of MDR;
removal of the separate category of supporter and a revised approach to supporting activities;
clarification of the rules for cooperation between entities obliged to report;
clarification of the rules for communicating the Tax Scheme Number, known in Poland as NSP, or information that such number has not been assigned;
changes to reporting rules for entities bound by professional secrecy under Polish law;
abolition of the obligation to submit MDR-2 notifications;
changes to the rules for submitting MDR-3 reports, including the possibility for such reports to be signed by an authorised representative;
abolition of the obligation to maintain an internal MDR procedure;
exclusion of the possibility to obtain an individual tax ruling on MDR provisions.

The catalogue of changes is broad, but their common objective is to reduce excessive formalism and bring Polish regulations closer to the EU standard. At the same time, this does not remove the responsibility for properly assessing cross-border arrangements.

Abolition of domestic MDR reporting as the main element of the reform

The most significant change is the removal of the obligation to report domestic tax schemes. From the very beginning, this solution raised numerous practical concerns, as the Polish rules in this respect were broader than the requirements arising under EU law.

Once the amendment enters into force, businesses operating solely in Poland will no longer need to analyse domestic arrangements for MDR purposes to the same extent as before. This should reduce the number of analyses carried out solely as a precautionary measure and ease the documentation burden on tax, finance and legal departments.

However, MDR obligations will remain relevant for cross-border arrangements. Particular attention will still need to be paid to, among others, intra-group transactions, foreign financing, reorganisations involving several countries, payments to foreign entities and holding structures with an international element.

Narrower scope of reporting triggers

The amendment also changes the way tax schemes are identified under Polish MDR rules. The basic definitions and the catalogue of hallmarks are being revised. Particularly important is the removal of the so-called other specific hallmarks, which did not result directly from the DAC6 Directive.

In practice, this should reduce situations where an MDR analysis was required for arrangements that had primarily commercial justification. Reporting is intended to focus more closely on cases corresponding to the EU model for the exchange of information on potentially aggressive cross-border tax arrangements.

In addition, VAT and excise duty will be excluded from the scope of MDR. This is another element narrowing Polish rules to the area that should remain subject to reporting obligations under the EU standard.

Changes concerning the parties involved in reporting

The new rules also reorganise the roles of entities involved in an arrangement. Until now, Polish MDR provisions distinguished between a promoter, a user and a supporter. In practice, this structure did not always make it easier to determine which entity was responsible for fulfilling the reporting obligation.

The amendment removes the separate category of supporter. Activities performed by such an entity will instead be assessed by reference to their significance for designing, making available, implementing or managing the implementation of an arrangement. If the involvement of a given entity is material, it may be classified as a promoter.

The rules governing cooperation between the promoter and the user will also change. Greater importance will be attached to documenting who reported the tax scheme, to whom the Tax Scheme Number was provided, and whether the other parties involved in the arrangement were properly informed that the reporting obligation had been fulfilled.

Professional secrecy and advisers’ obligations

The amendment also introduces important changes for entities bound by professional secrecy under Polish law, in particular tax advisers, attorneys-at-law, advocates and patent attorneys.

If reporting information on a tax scheme would breach legally protected professional secrecy, such an entity will not be required to make the report. Instead, such an entity will be required to notify the relevant promoter or, where no other promoter is involved, the user, that information on the tax scheme must be submitted to the Head of the Polish National Revenue Administration.

This is an important clarification of the relationship between MDR reporting obligations and the protection of professional secrecy. Until now, this area has been one of the more problematic aspects of applying the Polish MDR rules in practice.

Fewer forms and less formal procedure

The amendment also provides for procedural simplifications. MDR-2, i.e. the tax scheme notification, will be abolished. The rules for submitting MDR-3 reports will also change. Information on the application of a tax scheme is to be submitted once a year, separately for each reported tax scheme. In addition, MDR-3 will be able to be signed by an authorised representative, which should make reporting easier in larger organisations.

The obligation to maintain a formal internal MDR procedure will also be abolished. This does not mean, however, that businesses should completely abandon internal mechanisms for identifying reportable tax schemes. The obligation to properly assess cross-border arrangements will remain in force, as will the risk associated with incorrect classification or late reporting.

In practice, it may therefore be advisable to retain simplified internal rules. Their purpose will no longer be merely to comply with a formal procedural requirement, but to ensure proper information flow, allocation of responsibility and documentation of decisions made in the area of MDR.

No individual tax rulings and sanctions maintained

One important element of the amendment is the exclusion of the possibility to obtain an individual tax ruling on MDR provisions. Taxpayers will therefore not be able to obtain formal confirmation as to whether a given arrangement constitutes a reportable tax scheme and whether it must be reported.

At the same time, the legislator has not decided to significantly reduce penalties for breaches of MDR obligations. This means that, although the scope of reporting will be narrowed, responsibility for the correct classification of cross-border tax schemes will remain an important area of risk.

Practical conclusion

The MDR amendment is beneficial for businesses because it removes excessive obligations connected with reporting domestic tax schemes and limits the system to cross-border arrangements. This is a significant simplification, particularly for companies operating solely in Poland.

However, this is not the end of MDR. For entities operating in an international environment, reporting obligations will remain an important element of tax compliance in Poland. Before 1 October 2026, businesses should therefore not only scale back their existing procedures, but also adapt them to the new model: narrower, less formal, but still requiring careful assessment of cross-border transactions.

Zamknij

Evidence requests in Polish tax proceedings – when can the tax authority refuse to admit evidence?

Tax proceedings in Poland should not be a process in which only the tax authority decides which facts will be examined and which evidence will be taken into account. Under the Polish Tax Ordinance Act, taxpayers have the right to actively participate in proceedings, including the right to submit their own requests for evidence. In practice, however, not every piece of evidence proposed by a taxpayer will be admitted. When can the tax authority refuse an evidentiary request, and what options are available to taxpayers in such situations?

Taxpayers have the right to contribute to the evidentiary record

One of the fundamental principles of Polish tax proceedings is the obligation to establish the facts of the case thoroughly and accurately. The tax authority must take all necessary steps to determine the actual circumstances relevant to the outcome of the case.

This does not mean, however, that only the authority is responsible for building the evidentiary record. The principle of active participation allows taxpayers to submit their own evidence and request that specific evidentiary measures be carried out.

Evidence in tax proceedings may include documents, accounting records, witness testimony, expert opinions and any other means capable of helping to establish the facts. The catalogue of admissible evidence is open-ended, giving taxpayers broad opportunities to demonstrate circumstances relevant to their case.

When must the tax authority admit evidence?

The key provision is Article 188 of the Polish Tax Ordinance Act. Under this rule, a taxpayer’s request to admit evidence should be granted if it
concerns facts that are relevant to the case, unless those facts have already been sufficiently established by other evidence.

In other words, the tax authority may not arbitrarily disregard evidence submitted by a taxpayer. If the evidence could help clarify material facts, it should generally be admitted.

This principle was confirmed by the Supreme Administrative Court of Poland in its judgment of 11 December 2025 (case no. I FSK 1820/24). The Court held that a tax authority may not refuse evidence favourable to a taxpayer merely because it considers the existing evidentiary record sufficient. Such an approach could result in selective evidence gathering and undermine the principles of objectivity and impartiality.

This position is particularly important in practice. In tax disputes, authorities sometimes focus primarily on evidence supporting their own conclusions while downplaying evidence presented by taxpayers. Polish administrative courts have consistently emphasised that such an approach is incompatible with procedural rules.

The tax authority is not required to admit every piece of evidence

At the same time, a taxpayer’s right to submit evidentiary requests is not unlimited. Tax authorities are not obliged to admit every piece of evidence proposed by a party.

As the Supreme Administrative Court of Poland stated in its judgment of 11 April 2024 (case no. II FSK 1904/23), a refusal to admit evidence is justified not only where the relevant fact has already been sufficiently established by other evidence, but also where the fact in question is irrelevant to the outcome of the case or where the proposed evidence is incapable of proving that fact.

Similarly, in its judgment of 25 October 2023 (case no. I FSK 576/23), the Court stressed that Article 188 does not require authorities to grant every evidentiary request made by a taxpayer. A request may be refused where the relevant fact has already been established or where it is immaterial to the resolution of the case.

The Provincial Administrative Court in Poznań, Poland, reached a similar conclusion in its judgment of 21 March 2024 (case no. I SA/Po 874/23), holding that a taxpayer’s right to propose evidence does not automatically oblige the authority to carry out every requested evidentiary measure.

It should also be remembered that tax authorities are required to conduct proceedings efficiently and without undue delay. Consequently, requests that merely duplicate evidence already collected or cannot contribute to clarifying the facts of the case may be rejected. Admitting such evidence could unnecessarily prolong the proceedings.

From a taxpayer’s perspective, this means that evidentiary requests should be carefully prepared. Simply identifying a piece of evidence may not be sufficient. Taxpayers should explain which specific facts the evidence is intended to prove and why those facts are relevant to the outcome of the case.

What can a taxpayer do if evidence is refused?

A refusal to admit evidence is issued in the form of a procedural order. Importantly, under Polish tax procedure rules, such an order cannot be challenged by way of a separate interlocutory appeal.

This does not mean, however, that the authority’s decision is beyond review. The taxpayer may challenge the refusal in an appeal against the final tax decision.

If the matter subsequently reaches the administrative courts, the court will review the legality of the evidentiary proceedings and assess whether the authority had valid grounds for refusing the requested evidence.

It is worth noting that courts generally do not conduct evidentiary proceedings to the same extent as tax authorities. For this reason, submitting appropriate evidentiary requests during the audit or tax proceedings stage is often crucial to the effectiveness of a taxpayer’s defence.

Conclusion

The right to submit evidentiary requests is one of the key procedural safeguards available to taxpayers in disputes with Polish tax authorities. Although authorities are not required to admit every piece of evidence proposed by a taxpayer, any refusal must be based on specific legal grounds and properly justified. The practical takeaway is straightforward: taxpayers should actively participate in proceedings, submit evidence supporting their position, and ensure that their evidentiary requests are properly substantiated. In many cases, the outcome of a dispute with the tax authorities will depend largely on the evidentiary stage of the proceedings.

Zamknij

Acceptance protocols and the timing of service performance for VAT purposes in Poland

Determining when a VAT liability arises in relation to services remains one of the more challenging issues in practice under Polish VAT law. Although Article 19a(1) of the Polish VAT Act clearly states that VAT becomes due when a service is performed, establishing when a service is actually “performed” sometimes requires a case-by-case assessment of the contractual model and the underlying commercial reality. Recent Polish judgment by the Supreme Administrative Court of 31 March 2026 (I FSK 1353/23) provides important clarification in the context of IT services.

The nature of the dispute: performance vs. acceptance

The case concerned a taxpayer providing IT implementation and system upgrade services. The projects were delivered in stages, with each stage subject to formal acceptance by the client. Acceptance was documented through protocols signed after the client had verified the work and had the opportunity to raise objections.

The contractual model included:

clearly defined stages with allocated remuneration,
a client-side review and acceptance process,
invoicing conditional upon the signing of an acceptance protocol.

The taxpayer argued that, in such a model, a service (or part of it) is only performed once it has been accepted by the client. The tax authority took the opposite view, maintaining that performance occurs earlier (when the work is actually completed and submitted for acceptance) and thus the protocol serves merely as evidence of a taxable event that had already happened.

The position of the administrative courts

The courts of both instances (cases III SA/Wa 2823/22 and I FSK 1353/23) rejected the authority’s position.

The courts held that the key issue is whether the acceptance process:

forms part of the agreed scope of the service,
has genuine economic significance,
affects the existence or enforceability of the right to remuneration.

Where these conditions are met, acceptance cannot be regarded as a purely formal step. In such cases, the signing of an acceptance protocol may determine when the service is performed for VAT purposes under Polish law.

The relevance of CJEU case law (Budimex, C-224/18)

The Supreme Administrative Court also confirmed that the principles established by the Court of Justice of the European Union in case Budimex (C-224/18) are of general application and are not limited to construction services.

According to that case law:

the timing of service performance must reflect economic reality,
formal acceptance may be relevant if it confirms the actual completion of the service,
and, crucially, if it determines the right to payment or its enforceability.

The Court expressly rejected the view that these principles apply exclusively to the construction sector.

Broader context in case law

This judgment forms part of a broader trend in Polish VAT jurisprudence, moving away from a strictly formal interpretation of “service performance” towards a more economic, substance-based approach.

A similar conclusion was reached in the judgment of the Supreme Administrative Court of 4 March 2026 (I FSK 1367/23), concerning dealer bonus schemes. In that case, the Court held that VAT liability arises only once the amount of the bonus has been finally determined and approved, rather than at the stage when the underlying activities are carried out.

Practical implications

This matter is particularly relevant for taxpayers operating under staged delivery models, especially in the IT sector.

However, it does not mean that signing an acceptance protocol automatically determines the timing of VAT liability. The following factors are critical:

contractual provisions – the contract should clearly state that acceptance determines the completion,
actual performance – the acceptance process must be substantive (e.g. testing, possibility to raise objections),
link to remuneration – acceptance should determine the right to payment or its amount,
consistency of documentation – contracts, project schedules, acceptance protocols and invoicing rules should form a coherent framework.

Failure to meet these conditions may lead to disputes with the Polish tax authorities.

Tax risk and administrative practice

Despite the increasingly taxpayer-friendly approach in Polish jurisprudence, the practice of Polish tax authorities often remains more restrictive. As a result, taxpayers applying acceptance-based models should be prepared for potential disputes.

Each case should be preceded by an individual assessment, taking into account both the contractual arrangements and how they are implemented in practice.

Advance payments — unchanged rule

Importantly, advance payments remain subject to the standard VAT rules. Any payment received before the service is performed (including those before acceptance) triggers VAT liability at the time of receipt – as a gross amount, comprised of both net and VAT.

Conclusion

The judgment of 31 March 2026 (I FSK 1353/23) confirms that, under Polish VAT law, the moment a service is performed may – in certain contractual models – be linked to its formal acceptance.

However, this is not an automatic rule. The decisive factor is whether acceptance constitutes a genuine element of the service and whether, without it, the service could be regarded as economically complete.

In this context, an acceptance protocol may move beyond a purely evidentiary function and become a key factor in determining the timing of VAT liability.

Zamknij

The risk of a “double” invoice in KSeF – when XML and PDF don’t match

As the Polish National e-Invoicing System (KSeF) becomes more widely used, businesses are increasingly encountering a practical issue known as the “double document circulation.” This occurs when the structured invoice stored in KSeF (XML) differs from the PDF visualization sent to the customer, for example by email or through a customer portal.

In principle, visualization is meant only to make the data contained in the XML structure easier to read. In practice, however, the two documents are not always fully consistent. The problem becomes particularly serious when the PDF includes different amounts, additional line items, or elements that do not appear in the invoice recorded in KSeF.

For accounting departments and accounting firms, this creates a real dilemma. When two documents related to the same transaction present different information, the key question becomes which one should be used as the basis for accounting entries and payment. In practice, this may lead to operational errors—for example, when the procurement team registers the invoice received by email while the accounting team simultaneously retrieves the same invoice from KSeF. In extreme cases, this can result in the same transaction being recorded twice in financial systems, creating a risk of duplicate payment or overstated VAT deductions.

Two main causes are typically identified for such discrepancies. The first involves simplifications introduced by some invoice issuers. In practice, this is sometimes justified by technical limitations of XML files, for example when invoices contain a very large number of line items. The second relates to IT implementation issues—particularly incorrect data conversion processes that result in the PDF visualization not fully reflecting the information contained in the XML structure.

Regardless of the underlying cause, the outcome is the same: the risk of parallel document circulation increases. In practice, a single sale may end up being documented in two different ways—once as a structured invoice in KSeF and again as a PDF document circulating outside the system.

For this reason, there are growing calls for the Ministry of Finance to clarify the rules. Clear guidance on the relationship between
a structured invoice and its visualization could reduce uncertainty for businesses and accounting teams and prevent situations in which two different versions of the same document circulate simultaneously in the market.

Zamknij

Invoice timing and the right to deduct VAT – EU General Court challenges Polish rules

On 11 February, the EU General Court (Case T-689/24) delivered an important judgment in a “Polish case” on the moment of input VAT deduction. The ruling may have far-reaching consequences for Polish businesses and the way VAT is settled in Poland.

The essence of the judgment

The EU General Court held that the VAT Directive precludes national rules that make the input VAT deduction dependent from the date the purchase invoice is received. Under EU law, the right to deduct arises at the time the chargeable event occurs — i.e. when the goods are supplied or the services are performed.

Holding an invoice is a formal requirement for exercising that right, yet it does not determine when the right itself comes into existence. In practical terms, if a taxpayer has met the substantive conditions for deduction (the transaction actually took place, VAT was properly charged, and the purchase is used for taxable activities) and received the invoice before filing the VAT return for the relevant period, the deduction should be available in that period. Even if the invoice had been received after the end of that calendar period.

A practical example, based on Polish monthly VAT-reporting rules

Assume a transaction took place in February, and the invoice was received on 15 March. The deadline for filing the February VAT return is 25 March.

Under current Polish regulations and practice, the taxpayer could deduct the input VAT only in March, since that is when the invoice was received. Following the General Court’s judgment, this approach is incompatible with the VAT Directive. Since the chargeable event occurred in February and the invoice was received before the February return was filed, the deduction should be available in February.

Tension with Polish legislation

Polish rules explicitly linking the input VAT deduction to the date of receipt of the invoice are unfavorable for taxpayers, since it worsens their cash-flow. In practice, this shifts the right to deduct to a later reporting period, even where the taxpayer held the invoice before the filing deadline. On one hand, Polish regulations allow to issue a sales invoice (holding the buyer’s input VAT) till the 15^th of the following month. On the other hand, the seller is obligated to report output VAT in the month of sale, while the buyer is only allowed to deduct input VAT at a later month.

The judgment challenges this framework. The Court clearly distinguished between the moment the right to deduct arises (a substantive matter) and the formal conditions for exercising it. Member States may not introduce rules that effectively alter the moment that right comes into existence where all substantive requirements under
the Directive are met.

Implications for businesses
The ruling is highly significant in practice. First, it may require amendments to Polish VAT legislation to ensure full compliance with EU law. Second, it opens the door to earlier VAT deductions – directly improving companies’ cash flow. Since the implementation of structured xml-invoicing in Poland (February/April 2026) eliminates the practice, in which a seller could mention an earlier date on the invoice (e.g. issuing a PDF-invoice on March 3rd, yet dated February 28th), thus creating a chance for a quicker input VAT deduction, this ruling seems to be a blessing. In an environment of rising financing costs and increasing pressure on liquidity, accelerating a VAT deduction by even one month can have a measurable economic impact.

What’s next?
In the coming months, we can expect discussions on aligning domestic provisions with EU standards. Taxpayers may also consider revisiting prior VAT settlements and, relying directly on the VAT Directive and the Court’s judgment, seek to assert their right to earlier deductions.
The ruling reaffirms that, in the balance between domestic formalism and the substantive right to deduct, the principle of VAT neutrality prevails. In practice, this may mark a meaningful shift in how input VAT is accounted for — and potentially set a new standard in the Polish VAT system.

Zamknij

Invoice Issued Outside KSeF and Tax-Deductible Costs. Key Position of the Polish tax administration.

Individual tax ruling of 9 January 2026, ref. 0111-KDIB1-3.4010.714.2025.2.JG In an individual tax ruling dated 9 January 2026, the Director of the Polish National Revenue Information (KIS) addressed an issue that has raised significant practical concerns in the context of the implementation of the National e-Invoicing System (KSeF). The key question was whether an expense documented by an invoice issued outside the KSeF-system may be treated as a tax-deductible cost for the purposes of Polish corporate income tax (CIT).

The authority indicated that the mere fact that an invoice was issued outside KSeF does not automatically deprive tax-deductible costs, provided that the substantive requirements under the Polish CIT Act are met in the specific factual circumstances.

Conditions for recognizing an expense as tax-deductible – Article 15 of the Polish CIT Act

Under Article 15(1) of the Polish CIT Act, tax-deductible costs are expenses incurred in order to generate revenue or to preserve or secure a source of revenue – except for those expressly listed in Article 16(1).

In practice, for an expense to be recognized as tax-deductible, the following substantive and evidentiary conditions must be met jointly:

there must be a genuine cause-and-effect link between the expense incurred and the revenue (or its source),
the expense must not fall within the statutory catalogue of exclusions,
the transaction must be properly documented.

The authority emphasized that the actual nature of the transaction and its connection with revenue-generating activities are of primary importance. A purely formal aspect — such as the technical method of issuing the invoice — does not automatically determine whether the expense is deductible.

Documentation of costs and the form of the invoice

As a rule, the Polish CIT Act does not contain detailed provisions specifying the exact form in which expenses must be documented. However, pursuant to Article 9(1), taxpayers are required to maintain accounting records in a manner that allows to properly determine:

taxable income (or loss),
tax base,
tax due.

In practice, this means that taxpayers must hold reliable and credible accounting evidence confirming that a specific business transaction has taken place.

The individual tax ruling confirmed that:

a paper invoice,
an electronic invoice (e.g. in PDF format),
a structured invoice,

— may constitute a valid basis for recognizing a tax-deductible expense, even if it was issued outside KSeF. However, provided that it meets formal requirements and reflects a genuine transaction between identifiable parties.

Accordingly, in the context of this ruling, greater weight was attached to the substance and reliability of the document than to the technical channel through which it was issued.

Practical implications of the ruling

The ruling of 9 January 2026 neither abolishes nor limits the obligations arising from the regulations governing the operation of KSeF. Any failure to comply with e-invoicing requirements may give rise to separate formal consequences.

At the same time, the authority made it clear that the failure to issue an invoice through KSeF does not automatically result in the loss of the right to recognize the related expense as tax-deductible for CIT purposes.

From a practical standpoint, this confirms a fundamental principle applicable in income taxation: the right to deduct a cost is determined by substantive criteria and the genuine nature of the transaction, not solely by technical requirements relating to the form of the document.

In the context of the full rollout of KSeF, this ruling may serve as a relevant interpretative reference for taxpayers and advisors assessing CIT risks related to invoicing compliance.

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KSeF and foreign entities: when the use of a Polish VAT number triggers mandatory e-invoicing

The introduction of the mandatory Polish e-invoicing system (Krajowy System e-Faktur – KSeF) as of 1 February 2026 will significantly change VAT invoicing rules, i.a. transactions involving foreign entities. One of the key factors determining whether mandatory KSeF applies is whether a foreign counterparty has a fixed establishment (FE) in Poland. If it is lacking on the seller’s side, then he may issue and send invoices outside KSeF (e.g. via e-mail, PDF). If the seller is subject to KSeF yet his buyer is not (lacking seat/FE in Poland), then the seller must issue the invoice via KSeF, yet simultaneously send it to his buyer in the old-fashioned way.

The concept of a FE itself has not changed. It has long been part of the VAT system and has been extensively addressed in the European case law. What has changed is the practical relevance of FE in the KSeF environment. The latest tax authorities’ explanatory notes (issued on January 28^th) introduce certain legal assumptions as to whether the seller may assume the invoice exchange via KSeF to be sufficient (i.e. no separate e-mails/PDF’s needed).

According to the explanatory notes, a Polish supplier is not required to carry out an in-depth assessment of whether a foreign customer actually has a FE in Poland in a substantive VAT sense. For the purposes of determining the correct invoicing method, the supplier may rely on formal and objectively verifiable criteria.

In this context, particular importance is attached to the use of a Polish VAT identification number by the foreign buyer. The mere allocation of a Polish VAT number does not, in itself, determine the existence of a FE. However, where a foreign counterparty (i) uses a Polish VAT number in a specific transaction yet (ii) does not provide the supplier with a statement confirming the lack of a Polish FE involved in that transaction, the Polish supplier may assume that such FE exists and is involved. As a result, the invoice may be issued exclusively via KSeF, with no obligation on the seller’s side to make it available to the buyer outside the system.

This presumption is procedural in nature and is intended to protect the Polish supplier when selecting the appropriate invoicing model. It does not determine whether a FE actually, nor does it conclusively qualify the foreign entity’s structure for VAT purposes. Nevertheless, the absence of a statement from the foreign B2B-buyer operates to its disadvantage, regardless of whether its presence in Poland is operational or purely auxiliary.

The explanatory notes further clarify that the mere existence of an office, branch or administrative facilities in Poland does not automatically give rise to a FE, provided that such structures do not actually participate in the supply of goods or the provision of services. The autonomous nature of the FE concept also means that the existence of a “permanent establishment” for corporate income tax purposes, or capital links with Polish entities, is not decisive for VAT purposes.

From the perspective of Polish suppliers, this approach increases legal certainty and stabilises invoicing processes by removing the need for a detailed, case-by-case verification of the foreign counterparty’s status. However, for foreign entities holding and using a Polish VAT number, it means that information relating to the existence or non-existence of a fixed establishment must be actively managed in relations with Polish suppliers. The absence of appropriate procedures and failure to submit no-FE statements may result in invoices being issued solely through KSeF.

In this sense, the explanatory notes give the concept of a fixed establishment a distinctly practical dimension. In the KSeF environment, using a Polish VAT number without an appropriate statement may result in a transaction being brought within the KSeF regime, regardless of the foreign entity’s actual operating model.

In practice, this requires foreign companies to consciously manage the risks associated with having a potential fixed establishment in Poland and to align their internal procedures with the requirements of KSeF. This includes, in particular, reviewing the operating model from an FE perspective, preparing and using no-FE statements or statements confirming the lack of FE involvement in specific transactions, and properly structuring invoicing rules and communication with Polish counterparties. In the worst-case-scenario, they might lose access to their Polish purchase invoices, which in turn could cause issues with crucial payments (e.g. energy).

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Property tax after the general ruling – clarifying the rules or drawing new battle lines?

The general tax ruling issued by the Polish Minister of Finance and Economy on 27th of November 2025 addresses the issue of land, buildings and structures being deemed as “related to business activity”. It is one of the most significant documents in recent years in the area of property taxation. Its importance goes well beyond a purely technical explanation of statutory provisions. At its core, it touches on a fundamental and long-running dispute between taxpayers and tax authorities: where the line should be drawn between mere ownership of real estate and its use for business purposes.

The stated aim of the ruling was to bring order to a practice that, for years, had been marked by excessive automatism. In many cases, the mere fact that a property was owned by an entrepreneur was sufficient to justify the application of the highest property tax rates, regardless of whether the property actually served any business function. The new position adopted by the Polish financial administration significantly recalibrates this approach – although it does not eliminate all problems.

From “owner status” to a genuine link with business activity

For a long time, the prevailing assumption was that if a taxpayer carried on a business, his/her entire real estate portfolio should be regarded as connected with that business. This interpretation was convenient for the authorities, but increasingly challenged by Polish administrative courts and the Constitutional Tribunal. Case law consistently stressed that local taxes, as public-law burdens, must remain in a rational relationship to the actual manner in which property is used.

The general ruling clearly aligns with this line of reasoning. Rather than relying solely on the formal criterion of who-owns-the-property, it shifts the focus towards a functional analysis: whether, and in what way, a given property serves business activity, either at present or in a reasonably foreseeable future.

Three models for classifying real estate

To structure the assessment, the Minister of Finance and Economy identified three basic scenarios in which the link between real estate and business activity should be examined.

The first model covers entities whose activity is exclusively commercial in nature, such as capital companies and other legal persons established to carry out profit-aimed operations. In their case, a presumption applies that the real estate they own is related to business activity, even if it is not currently generating income or being actively used. What matters here is the overall business profile of the entity, rather than the temporary manner in which a specific property is used.

At the same time, the ruling qualifies this presumption by using the phrase “as a rule,” suggesting that exceptions may exist. However, the absence of any detailed guidance on such exceptions means that the boundaries of this presumption remain blurred and may give rise to further disputes.

The second model concerns taxpayers operating in a so-called dual role, combining business activity with other, non-commercial, pursuits, whether private or statutory. This group includes, in particular, individuals running sole proprietorships, as well as foundations, associations and other entities for which business activity is ancillary. In these cases, the ruling clearly rejects the automatic application of the highest tax rate to the entire property portfolio. Business property taxation is limited to those assets that are actually used for business or that remain in a clear, functional relationship with it.

The third model addresses situations in which a property is used in the business activity of another entity, for example under a lease or tenancy arrangement. The interpretation emphasizes that the mere fact that a property is used by an entrepreneur does not determine its tax classification. What is decisive is the status of the owner and whether, on their side, there is a business activity with which the property can be linked.

Actual use versus preparation for future activity

One of the more practical aspects of the ruling is the distinction it draws between the actual use of a property and its maintenance or preparation for future business purposes. According to the Minister, a connection with business activity may also exist where a property is not currently in use but remains at an investment, redevelopment or safeguarding stage, provided that the taxpayer is taking evident steps aimed at its future commercial use.

At the same time, the ruling clearly distances itself from the notion of purely hypothetical usefulness. The mere abstract possibility that a property could be used in a business, unsupported by any tangible actions on the part of the taxpayer, should not justify the application of the highest property tax rates.

Practical implications for taxpayers

From the taxpayers’ perspective, the general ruling strengthens arguments against overly aggressive taxation, particularly for individuals and entities with a mixed activity profile. At the same time, it does not put an end to all disputes—especially where the analysis relies on open-ended concepts such as a “functional link” or “preparation for business activity.”

In practice, the document should prompt taxpayers to take a critical look at their real estate holdings, reassess how individual properties are used, and ensure that relevant circumstances are properly documented. For many entities, this may affect not only current tax settlements, but also the assessment of whether corrections to property tax liabilities for prior years are justified.

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It may be worth seeking your own Polish tax ruling on invoices issued outside Poland’s e-Invoicing System (KSeF)

Even though penalties for issuing invoices outside Poland’s National e-Invoicing System (KSeF) have been deferred until 1 January 2027, the real headache may come sooner.

In 2026, plenty of “traditional” invoices (e.g., PDFs sent by email) will likely still be in circulation in Poland – some due to lack of awareness, some because of a misinterpretation of the rules, and some simply out of habit. For buyers, that’s not just an operational nuisance; it can also create Polish tax exposure.

In practice, a buyer may be left without clear answers to two basic questions:

• Why wasn’t the invoice submitted to Poland’s KSeF?

• Does it still allow the buyer to deduct Polish VAT and/or treat the expense as tax-deductible for Polish CIT/PIT purposes?

The uncertainty is compounded by the monthly PLN 10,000 gross threshold for invoices issued outside KSeF. A seller loses the right to invoice outside KSeF starting with the invoice that pushes them over the limit. From a buyer’s perspective, it may be impossible to tell whether the invoice they received should already have been issued via KSeF or whether it still falls within the “allowed” threshold. Cross-border transactions add another layer of complexity—especially when the key issue is whether a foreign counterparty has a “fixed establishment” in Poland. That assessment is often not straightforward, and it’s easy to get wrong.

On the VAT side, some comfort comes from individual rulings issued by the Head of Poland’s National Tax Information (DKIS) (e.g. case 0114-KDIP1-3.4012.838.2024.1.MPA and 0114-KDIP1-3.4012.507.2025.1.JG). These indicate that VAT deduction may still be possible where the invoice reflects a genuine transaction connected with taxable activity – even if, in theory, it should have gone through KSeF.

That said, tax authority practice can be inconsistent. So where significant amounts are involved, purchases are recurring, or counterparties are “hard cases”, it may be sensible to apply for your own individual ruling to secure protection tailored to your specific activity in Poland.

The biggest open question remains Polish tax-deductible costs (CIT/PIT) – there is still no clear guidance from either DKIS or the Ministry of Finance. All the more reason to consider an individual ruling in your specific case.

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Articles

B2B arrangements under tax scrutiny: how Poland’s UD116 bill could change the tax treatment of entrepreneurs

Services provided to related parties – 17% lump-sum tax

Letting property to one’s own company

Trademarks and other intellectual property rights – 17% rate

Higher rate for service businesses without employees

IP Box subject to an employment requirement

IP Box income to be included in the solidarity levy base

Cars purchased after leasing – three-year period before a tax-free sale

What does UD116 mean for entrepreneurs?

MDR amendment signed into law: how will Polish tax scheme reporting change from 1 October 2026?

Key changes to Polish MDR rules

Abolition of domestic MDR reporting as the main element of the reform

Narrower scope of reporting triggers

Changes concerning the parties involved in reporting

Professional secrecy and advisers’ obligations

Fewer forms and less formal procedure

No individual tax rulings and sanctions maintained

Practical conclusion

Evidence requests in Polish tax proceedings – when can the tax authority refuse to admit evidence?

Taxpayers have the right to contribute to the evidentiary record

When must the tax authority admit evidence?

The tax authority is not required to admit every piece of evidence

What can a taxpayer do if evidence is refused?

Conclusion

Acceptance protocols and the timing of service performance for VAT purposes in Poland

The nature of the dispute: performance vs. acceptance

The position of the administrative courts

The relevance of CJEU case law (Budimex, C-224/18)

Broader context in case law

Practical implications

Tax risk and administrative practice

Advance payments — unchanged rule

Conclusion

The risk of a “double” invoice in KSeF – when XML and PDF don’t match

Invoice timing and the right to deduct VAT – EU General Court challenges Polish rules

On 11 February, the EU General Court (Case T-689/24) delivered an important judgment in a “Polish case” on the moment of input VAT deduction. The ruling may have far-reaching consequences for Polish businesses and the way VAT is settled in Poland.

Invoice Issued Outside KSeF and Tax-Deductible Costs. Key Position of the Polish tax administration.

KSeF and foreign entities: when the use of a Polish VAT number triggers mandatory e-invoicing

Property tax after the general ruling – clarifying the rules or drawing new battle lines?

It may be worth seeking your own Polish tax ruling on invoices issued outside Poland’s e-Invoicing System (KSeF)

Even though penalties for issuing invoices outside Poland’s National e-Invoicing System (KSeF) have been deferred until 1 January 2027, the real headache may come sooner.

Newsy