Inability to Deduct VAT: Impact on Public Services and IT Security in Municipality

• The municipality is a registered, active VAT taxpayer, but will not act as a VAT taxpayer when implementing the project, but as a public authority.
• Expenses for the project (implementation of procedures, audit, purchase of equipment and software, training) will serve to improve the provision of public services and increase the cybersecurity of the municipality, not taxable activities subject to VAT.
• According to the VAT Act, the right to deduct VAT is only available to the extent that goods and services are used for taxable activities. This condition is not met in this case.
• The municipality will not be able to reduce the tax due by the VAT charged on invoices documenting project expenses, as they are not related to VAT taxable activities.
• Local government units are VAT taxpayers only for civil law activities, not for the implementation of public tasks.
• Expenses for the project aim to improve the provision of public services, not the economic activity of the municipality, so it is not entitled to VAT deduction.

Source: sip.lex.pl

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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