VAT rates and VAT taxation of services under the new rules in 2025

Changes to taxation of services

The amended VAT Directive implies changes to the taxation of certain services subject to VAT under specific rules. These changes include virtual cultural events and broader streaming activities.

At present, the place of supply of admission services to cultural, sporting, entertainment etc. events and ancillary services to these services is the place in which the events actually take place. This means that in a situation in which, for example, a professional conference is organised in Poland, the place of taxation of these services will also be the territory of Poland. Under the current wording of Articles 53 and 54 of the VAT Directive, virtual admission tickets for such events are also taxed at the place the event actually takes place. This conflicts with the general VAT principles that taxation should take place where the actual consumption takes place.

Directive 2022/542 changes the tax treatment of streaming services. According to the adopted amendments, the special regulations for event admission services will not apply to tickets allowing "virtual presence" at an event. This means that taxable persons providing certain streaming services will have to account for VAT under the general rules and consider that the services have been provided in the country of the purchaser. In this situation, a taxable person supplying services to non-taxable persons will be forced to charge the VAT rate appropriate to the country of residence of the purchaser.

More VAT rates

Directive 2022/542 also introduces significant changes to VAT rates. In principle, the VAT Directive gives Member States the option to apply one or two reduced VAT rates. The 2022 amendment changes this rule and allows Member States to introduce more than two reduced rates. Poland will therefore be able to introduce additional reduced VAT rates.

There will be no change to the minimum rate, which cannot be less than 5%.

Member States will also have the option to apply a rate lower than the minimum rate to up to seven categories of goods and/or services listed in Annex III of the VAT Directive. The use of VAT rates lower than 5% is to be restricted after 2032.

An important change is also the clarification of Article 98 of the VAT Directive by indicating that Member States may use the Combined Nomenclature (CN) or the statistical classification of products by activity to determine the scope of a given category subject to a reduced rate.

The introduction of an additional regulation in this respect dispels doubts as to the correctness of the allocation of goods and services to a given VAT rate according to the CN and PKWiU.

Other changes

Besides changes to VAT rates and taxation of services, Directive 2022/542 also provides for:

• Changes to the taxation of ancillary services to streaming services;
• Clarification of the rules for determining the VAT rates applicable to the importation of goods - these rates are to be the same as for the supply of the same goods within the territory of a Member State;
• Allowing Member States to exempt from VAT goods imported for the benefit of disaster victims, if prior authorisation for VAT exemption on the importation of these goods has been granted by the European Commission;
• Clarification of the rules for the continued application of the reduced VAT rates that were introduced during the COVID-19 pandemic;
• Extension and clarification of the list of goods and services to which reduced VAT rates may be applied, including:

• entry to sporting events or access to live streaming of these events, or both;
• the use of sports facilities and the offering of sports or physical activities also in the case of live streaming;
• the supply and installation of solar panels on private residential buildings, residential buildings and on and adjacent to public buildings and other buildings used in the public interest;
• the provision of repair services for household appliances, footwear and leather goods, clothing and household textiles (including mending and alterations);
• the supply of electricity, district heating and district cooling and biogas;
• live plants and other ornamental plant products, including tubers, cotton, roots and similar products, cut flowers and ornamental foliage;
• children's clothing and footwear; supply of child car seats;
• supply of bicycles, including electric bicycles; rental and repair services for such bicycles;
• legal services provided to person under employment contracts and unemployed persons in proceedings before employment courts and legal services provided under the legal aid scheme, as defined by the Member States;
• tools and other equipment normally intended for use by emergency or first-aid services, when provided to public authorities or not-for-profit organisations acting to protect the public or the community;
• the provision of services related to the operation of lighthouses, beacons or other navigational aids and rescue services, including the organisation and maintenance of lifeboats.

It should be emphasised that the changes in rates will not extend to so-called 'beauty' services, which, as promised by the new parliamentary majority, were to be taxed at a lower VAT rate.

Amendments to the VAT Act

The government has so far decided not to publish the draft amendments to the VAT Act implementing the provisions of Directive 2022/542. We may most likely expect the draft amendments to the Act in the second half of next year. The provisions amending the VAT Act should enter into force on 1 January 2025 at the latest.

VAT – how can we help?

As part of our tax advisory services in Poland, we provide clients with comprehensive support in the areas of VAT, CIT and PIT.

Our VAT services include:

• day-to-day VAT support, including preparation of summary declarations and Intrastat declarations
• acting as fiscal representative for non-EU companies
• processing of Polish VAT refund applications for EU and non-EU companies
• VAT advisory services
• VAT settlements for EU companies operating in Poland 
• VAT registration for Polish and foreign companies

Explore also: Ongoing tax advisory in Poland