An amendment to the Polish VAT Law has been proposed that would limit the deduction of input VAT attributed to activities outside the scope of VAT. Currently, input VAT incurred on the purchase of goods and services are deductible on a pro-rata basis when performing mixed supplies, i.e. performing activities that are subject to VAT and those that are exempt. However, in practice the input VAT deduction limitation only applies for exempt supplies and not for input VAT attributable to activities outside the scope of VAT.
Under the proposed amendment, a pre-pro-rata calculation would be performed to determine the percentage of input VAT attributed to activities outside the scope of VAT and the resulting amount would be non-deductible. There is no plan to issue a complete list of activities outside the scope of VAT or an exact pre-pro-rata calculation method. It has been reported that a number of methods may be introduced and that taxpayers will have a certain amount of flexibility in the method applied, with the possibility that the method would need to be confirmed by the tax office.
If enacted, any tax law interpretations issued in the past allowing such deductions would no longer apply. The effective date for the amendment is proposed for 1 January 2015, although it has not yet been submitted as a bill in parliament.