How are sales between members of a VAT group taxed?

Sales between members of a VAT group are not subject to VAT. This means that transactions performed between entities within the same VAT group are exempt from value-added tax. The VAT group is a mechanism introduced as part of the “Polish Deal” program, aiming to reduce administrative burdens, streamline financial processes, and enhance liquidity for companies using this solution. Here are some key points regarding VAT groups in Poland:

• Eligibility to Join a VAT Group:
  • Any entity that is a Polish taxpayer can become a member of a VAT group.
  • The institution is open to various forms of enterprise organization, including natural and legal persons, as well as organizational units without legal personality (e.g., civil law partnerships, general partnerships, limited liability partnerships, limited partnerships, or limited joint-stock partnerships).
  • A VAT group can be created by entities with a registered office in Poland or entities operating in Poland through a branch located in the country.
  • If a domestic entity with a foreign branch becomes a member of a VAT group, the branch itself will not be part of the group. However, if a foreign entity operates in Poland through a branch, only the branch (located in Poland) will enter the VAT group.
• Conditions for Joining a VAT Group:
  • Entities forming a VAT group must be related financially, economically, and organizationally.
  • Financial relatedness includes ownership of more than 50% of shares, voting rights, or profit participation among group members.
  • Economically related entities have similar main activities.
  • Organizational relatedness involves coordination or management between group members.
• Tax Treatment Within the VAT Group:
  • Transactions between members of the same VAT group are neutral for VAT purposes.
  • Sales, purchases, and other transactions within the group do not trigger VAT liability.
  • This results in significant cost savings and improved financial liquidity for the group members.

Sources

• vatassociation.org
• rsm.global
• polishtax.com
• wts.com

 

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