VAT implications of donations received by local government units (JST)

VAT implications of donations received by local government units (JST) in Poland. While such donations—often used for socially beneficial purposes like funding sports equipment, AED devices, or infrastructure upgrades—are typically seen as non-taxable, the Polish tax authorities increasingly interpret them as taxable services when certain conditions are met.

Key Points:

• Donations vs. Services: If a donation agreement includes obligations for JST to publicly acknowledge the donor (e.g., displaying logos, social media posts), tax authorities may classify this as a promotional service, making the donation subject to VAT.
• Legal Interpretation: According to Art. 8(1) of the VAT Act, any service provided in exchange for compensation—even symbolic—may be taxable. The presence of contractual obligations to promote the donor can trigger VAT liability.
• Case Law & Interpretations: Several individual tax rulings (e.g., DKIS interpretations from 2025, 2020, 2018, and 2017) support this view, emphasizing that non-voluntary promotional actions tied to donations constitute taxable services.
• Risk Mitigation: JSTs are advised to carefully review donation agreements, especially clauses that may imply promotional duties. In ambiguous cases, seeking individual tax interpretations is recommended to avoid unexpected VAT liabilities.

⚠️ Conclusion:

While donations are a valuable support mechanism for local governments, failure to distinguish between genuine donations and reciprocal promotional arrangements can lead to significant tax risks. Each case should be individually assessed to ensure compliance and avoid turning goodwill into a financial burden.

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You can read the full article here. [deloitte.com]

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