As a general rule, to the extent that goods and services are used for the purposes of carrying out taxable activities, a taxable person engaged in economic activity is entitled to reduce the amount of output tax by the amount of input tax. The right to deduct input tax was introduced in order to relieve the taxable person of the burden of tax paid or payable. The European Court of Justice has ruled on the principle of neutrality; in its judgment of 15 January 1998 in Case C-37/95 between the Belgian State and Ghent Coal Terminal NV, stated that the common system of value added tax allows a taxpayer to deduct the VAT paid by that taxpayer on goods or services acquired for the purposes of their business activities relating to the performance of taxable transactions. The Court regards the right to deduct input tax as an expression of the principle of neutrality, and this right may not be restricted by a Member State.
The legislator has also provided for analogous, favourable arrangements for flat-rate farmers. A flat-rate farmer is a farmer supplying agricultural products or providing agricultural services who benefits from a tax exemption under Article 43(1)(3), with the exception of a farmer required under separate provisions to keep accounts.
Pursuant to Article 115(1) of the VAT Act, a flat-rate farmer supplying agricultural products to a VAT-registered person who accounts for that tax is entitled to a flat-rate tax refund in respect of the purchase of certain means of production for agriculture subject to that tax, and the amount of the flat-rate tax refund is paid to the flat-rate farmer by the purchaser of the agricultural products. Currently, the flat-rate tax refund rate is 7% of the amount due for the supply of agricultural products, less the amount of the flat-rate tax refund.
Obtaining the refund is subject to several conditions, including having the status of a flat-rate farmer, making a supply to an active VAT taxpayer, and receiving a VAT RR invoice containing the following statement: “I declare that I am a flat-rate farmer exempt from VAT pursuant to Article 43(1)(3) of the VAT Act.”
Furthermore, it is worth noting that a flat-rate farmer, in the course of their agricultural activity involving the supply of agricultural products, is exempt from the obligation to:
-
issue invoices;
-
keep records of supplies and purchases of goods and services;
-
submit a monthly VAT return to the tax office, as referred to in Article 99(1) of the VAT Act; and
-
make the registration declaration referred to in Article 96 of that Act.
However, it is important to remember to archive documents, as a flat-rate farmer is obliged to retain the originals of VAT RR invoices and copies of declarations (with the content specified above) submitted for the purposes of contracting agreements or other agreements of a similar nature, for a period of 5 years from the end of the year in which the invoice was issued. Importantly, this obligation also applies to VAT RR invoices and declarations issued in electronic form.
Frequently asked questions
Can a flat-rate farmer recover VAT on purchased production inputs?
Yes, a flat-rate farmer is entitled to a flat-rate VAT refund for the purchase of certain production inputs subject to VAT. The amount of this refund is currently 7% of the amount due from the supply of agricultural products, reduced by the refund itself. These funds are paid by the purchaser of the products.
What conditions must a farmer meet to receive a VAT refund?
To obtain a refund, the farmer must have flat-rate farmer status and make supplies to an active VAT taxpayer. It is also necessary to receive a VAT RR invoice with an appropriate declaration of tax-exempt status. Without meeting these conditions, the right to a refund does not arise.
Must a flat-rate farmer issue invoices and file VAT returns?
No, a flat-rate farmer is exempt from the obligation to issue invoices, maintain supply records, and file monthly VAT returns. They also do not need to register for VAT. However, this exemption applies only to agricultural activities conducted.
How long must a flat-rate farmer keep documents related to the sale of products?
The farmer is obligated to keep original VAT RR invoices and copies of declarations for a period of five years. This time period begins to run from the end of the year in which the invoice was issued. This obligation also covers documents issued in electronic form.
What must a VAT RR invoice contain for a farmer to obtain a tax refund?
An essential element of the invoice is the farmer’s declaration that they are a flat-rate farmer exempt from tax based on the relevant provision of the VAT Act. Without this declaration, the invoice does not meet the requirements necessary for the purchaser to obtain a flat-rate tax refund.
A tax question or a dispute with the authorities?
That is where most conversations with a lawyer begin. A consultation is paid, PLN 600 net. You pay for a real opinion: whether you have a legal problem, what you can do about it and roughly what it costs. It ties you to nothing further, and you do not need to know the law, that part is on us.
- 1 Talk
You tell us what is going on, in your own words.
- 2 What next
We tell you your options and what it costs.
- 3 We act
You give the go-ahead and the matter is ours.
The practice includes ongoing advice on administrative and tax law. He has extensive experience in handling judicial, administrative, tax and judicial-administrative proceedings concerning both individual clients and business entities, including that gained through many years of providing services to local government units and other units of the public finance sector.
View profile →
