Opt-out from VAT exemption for financial services under Polish law

Purpose of the new regulations

According to the Ministry of Finance, granting taxpayers the option of taxing financial services is aimed at ensuring greater neutrality of VAT in the financial sector, which could constitute an additional incentive to locate new investments of entities from the financial sector in Poland. The currently applied tax exemption means that input tax concerning the provision of these services is, in principle, not deductible.

Scope of the opt-out

Taxpayers are able to withdraw from the VAT exemption and charge VAT on the following services, if these services are provided to VAT taxpayers:

• transactions concerning currency, bank notes and coins used as legal tender as well as agencies related to these services;
• fund management services;
• provision of a credit or loan of money (including agencies related to these services) and management of a credit or money loan by a lender;
• surety, guarantee and any other security concerning financial and insurance transactions (including agencies related to these services) and management of credit guarantees by a creditor or lender;
• cash deposit services, maintenance of cash accounts, any kinds of payment transactions, money orders, debts, checks and bills of exchange and agencies related to these services;
• services involving shares as well as agencies related to these services; and
• services in the field of financial instruments and agencies related to these services.

Conditions of the withdrawal

A taxpayer withdrawing from the exemption and choosing taxation by filing a statement to the authorities will be obliged to tax all the services they provide listed above and provided to taxpayers. Therefore, it will not be possible to withdraw from the exemption only for selected types of services.

Moreover, the entity that withdraws from the exemption will be bound by this choice for two years. After this time, the taxpayer will be able to reapply the exemption in transactions but also/only for a minimum period of two years.

Should you have any questions, please do not hesitate to contact Maciej Kulawik or Brunon Surma, members of the tax practice at Allen & Overy’s Warsaw office.