Subject VAT Exemptions in a Sole Proprietorship (JDG) in Poland 2026 — what is not subject to VAT

Taxpayer exemption vs subject exemption — what's the difference?

This is the most common source of confusion:

• Taxpayer exemption (art. 113) — exempts your ENTIRE business from VAT if your revenue is < 200 000 zł per year. You can opt out of it (voluntary VAT).
• Subject exemption (art. 43) — exempts a SPECIFIC service or good, regardless of revenue. You cannot opt out of it — it is mandatory.

Example: you are a doctor with 500 000 zł in annual revenue. You do not qualify for the taxpayer exemption (threshold exceeded), but your medical services are subject-exempt (art. 43 ust. 1 pkt 19). So you do not charge VAT on those services.

List of the most important subject exemptions (art. 43)

Medical services (item 18-19a)

1. Healthcare services — provided by doctors, nurses, psychotherapists
2. Medical activity — hospitals, clinics, practices
3. Key condition: the service must be classified under PKWiU (Polish classification of goods and services) section 86 (healthcare)

Educational services (item 29)

1. Vocational training and retraining — vocational courses, training
2. Key condition: the course must be accredited or certified by a public institution
3. Business training without certification → standard 23% rate

Financial and insurance services (item 37-41)

1. Granting loans and credits
2. Insurance intermediation
3. Fund management
4. Banking services

Insurance and pension services

1. Transferring contributions to ZUS (social insurance) and OFE
2. Managing pension portfolios

Real estate (item 10-11)

1. Supply of buildings and structures — exempt, unless first occupation or option to tax
2. Real estate rental — residential, for housing purposes
3. Commercial rental → standard 23% rate, but you can optionally elect to tax

Cultural and sports activities

1. Services related to culture (theatres, museums, cinemas)
2. Sports services (PKWiU section 93)
3. Library activities

Other common exemptions

1. Daycare for children (nurseries, preschools)
2. Social assistance activities (PKWiU 88)
3. Real estate brokerage services — if they concern exempt buildings (item 10)
4. Export of goods — exempt, but this is a separate category (art. 41 ust. 4)

What does this mean for invoices?

If you provide subject-exempt services, your invoices MUST:

• Include the annotation "zwolniony" or "zw." next to the rate
• Indicate the legal basis — art. 43 ust. 1 pkt X of the VAT Act
• NOT contain a VAT amount (because there is none)

Example of a subject-exempt invoice

Service: Psychological consultation (PKWiU 86.90.E)
Net amount: 1 000,00 zł
VAT: zw. — art. 43 ust. 1 pkt 19 of the VAT Act
Gross: 1 000,00 zł

Pitfalls

1. Mixing exempt and taxed services

If you provide both exempt and taxed services, you must separately record each group. When settling input VAT on costs (that serve both types of activity), you must apply the proportion indicator.

2. Exemption depends on PKWiU

Some exemptions depend on the PKWiU (Polish classification of goods and services) classification. If you misclassify a service, the tax office may challenge the exemption. Always check the PKWiU before issuing an invoice.

3. Care services — only specific PKWiU

Not every "care" service is exempt. Only those classified under PKWiU 88.10.A (social care) or 86.90.E (psychological care). Other PKWiU → standard 23% rate.

4. No right to deduct input VAT

If you provide ONLY subject-exempt services, you cannot deduct VAT on purchases related to that activity. This is the biggest downside of the subject exemption — it "freezes" VAT on costs.

5. VAT registration despite exemption

Even if you provide subject-exempt services, it is worth registering as a VAT taxpayer. This lets you recover VAT on costs that serve your taxed activity (if you also run one).

FAQ

Can I opt out of a subject exemption?

No. Unlike the taxpayer exemption (200 000 zł threshold), subject exemptions are mandatory. You cannot decide to charge 23% VAT on a medical service.

Is the sale of a license to my software exempt?

No. Software licenses are taxed at 23%. The exemption under art. 43 ust. 1 pkt 1 applies only to licenses for intangible assets such as patents and trademarks — and only in certain cases.

I run an auto repair shop and repair VAT-exempt cars. Is my service exempt?

No. Your repair service is taxed at 23% regardless of whether the customer's car is exempt. The exemption applies to the supply of goods, not repair services.

Are health and safety (BHP) training sessions exempt?

It depends. If the BHP training is mandatory (required by law) and accredited — exempt. If it is optional training without accreditation — taxed at 23%.

Need help with VAT?

Oxyok accounting — from 49 zł + VAT per month. We will help you determine which services are subject-exempt, how to issue invoices correctly, and how to recover VAT on costs.

Write to: [email protected]

Disclaimer: Subject exemptions depend on the specific PKWiU classification and the legal status as of the date the service is provided. This article is informational in nature — before making a decision, consult an accountant or legal advisor.