Businesses using the VAT exemption often have doubts about how to mark their invoices correctly. A particularly important question is whether the legal basis for the exemption has to be shown on sales documents. The changes to tax law introduced from 2014 significantly affected the position of VAT-exempt taxpayers, giving them the right to issue invoices instead of bills (rachunki). From 2026, KSeF (National e-Invoicing System) comes on top of this, and its FA(3) structure has its own fields for the basis of the exemption.
How VAT-exempt taxpayers should mark their invoices needs a detailed explanation, because the rules provide for different situations and different obligations depending on the type of exemption. Not all businesses using an exemption have identical obligations when it comes to marking their sales documents. The formalities of registering as a VAT-exempt taxpayer are described separately.
Types of VAT exemption and their consequences
Polish tax law provides for several different types of VAT exemption, which have different consequences for how invoices are marked. Each type of exemption requires an individual approach to stating the legal basis on sales documents.
Under Article 106e(1) point 19 of the VAT Act (ustawa o VAT), businesses using certain types of exemption must include the relevant legal basis on their invoices. This applies to exemptions based on the type of activity (Article 43(1)), specific provisions (Article 82(3)), not exceeding the sales limit (Article 113(1) and (9)) and the SME exemption (Article 113a(1)). The provision requires a reference to a provision of the Act, a provision of Directive 2006/112/EC or another legal basis for the exemption
The first type of exemption is the exemption based on the type of activity, set out in Article 43(1) of the VAT Act. It covers activities that are exempt from VAT because of their nature. Businesses using this type of exemption must show the relevant legal basis on their invoices.
The second type covers exemptions under specific provisions, referred to in Article 82(3) of the VAT Act. These exemptions concern specific situations and types of activity that the legislator decided to exclude from VAT. Here too, businesses must mark their invoices with the relevant legal basis.
The third type of exemption concerns not exceeding the sales limit in either the previous or the current tax year, set out in Article 113(1) and (9) of the VAT Act. This type of exemption has special rules on marking invoices, which differ from the other types of exemption
The exemption for not exceeding the sales limit of PLN 240,000 (from 1 January 2026; in 2017–2025 – PLN 200,000) is the type of exemption most often used by small businesses. This limit is a significant relief for people starting a business and for small firms.
Special rules for the turnover-based exemption
Businesses using the VAT exemption because they have not exceeded the sales limit of PLN 240,000 have special rights when it comes to marking their invoices. These rules now follow from the Regulation of the Minister of Finance of 29 October 2021 on issuing invoices (Journal of Laws (Dz.U.) 2021 item 1979, as amended), which replaced earlier regulations, including the one of 3 December 2013. The general rules on who can issue an invoice are collected in a separate article.
Under § 3 point 3 of the Regulation of the Minister of Finance of 29 October 2021 on issuing invoices, an invoice of a taxpayer exempt under Article 113(1) and (9) of the VAT Act contains a narrower set of data (§ 3 point 1 letters a–g), without stating the legal basis for the exemption – so the taxpayer may leave it out on an invoice issued outside KSeF
This option of leaving out the legal basis is a significant relief for small businesses. Structured invoices are different: from 1 April 2026, taxpayers using the small business exemption issue invoices in KSeF (Article 106ga(1) of the VAT Act; until 31 December 2026 they may issue them outside KSeF if the gross value of sales documented by invoices in a given month does not exceed PLN 10,000 – Article 145m). In the FA(3) structure, marking a sale as exempt (field P_19) requires filling in one of the fields P_19A (provision of the Act), P_19B (provision of the directive) or P_19C (another basis) – so in KSeF the basis of the exemption, e.g. "art. 113 ust. 1 ustawy o VAT" (Article 113(1) of the VAT Act), has to be given. For invoices outside KSeF (including invoices for consumers – Article 106ga(2) point 4), a business can choose from, among others, the following options:
- Stating the legal basis for the VAT exemption on the invoice
- Leaving the invoice without any reference to the legal basis for the exemption
- Adding general information about the exemption without citing a specific provision
- Using its own wording to inform about the exemption
- Citing a provision of Directive 2006/112/EC or another legal basis instead of a provision of the Act
The right option depends on the business's preferences and the nature of its activity. Some businesses prefer to mark their invoices clearly to avoid possible questions from customers or tax authorities. Others prefer simpler solutions that do not require additional markings.
Leaving out the legal basis on an invoice does not mean giving up the VAT exemption. The business still uses the exemption, it simply does not have to mark this on its sales documents
Practical aspects of marking invoices
Businesses that decide to show the legal basis for the exemption on their invoices can choose from several wordings. The right wording depends on the business's preferences and its customers' requirements.
The most commonly used wordings are:
- "Zwolniony z VAT na podstawie art. 113 ust. 1 ustawy o VAT" (exempt from VAT under Article 113(1) of the VAT Act)
- "Sprzedaż zwolniona z VAT - art. 113 ust. 1 ustawy o VAT" (sale exempt from VAT – Article 113(1) of the VAT Act)
- "Zwolnienie z VAT zgodnie z art. 113 ust. 1 ustawy o VAT" (VAT exemption in accordance with Article 113(1) of the VAT Act)
- "Dostawa zwolniona z podatku VAT na podstawie art. 113 ust. 1 ustawy o VAT" (supply exempt from VAT under Article 113(1) of the VAT Act)
| Type of wording | Advantages | Disadvantages | Recommendation |
|---|---|---|---|
| Full legal wording | Clarity, no doubts | Length, formality | For firms working with large customers |
| Short wording | Clarity, saves space | Less legal precision | For standard business activity |
| General information | Simplicity, universal | No legal details | For small firms |
| No marking | Maximum simplicity | Possible questions from customers; not available in KSeF | For firms with regular customers (invoices outside KSeF) |
The choice of wording should reflect the nature of the business. Firms working with large customers, especially the public sector, often prefer full legal markings. Small firms serving individual customers can use simpler solutions.
Whatever wording you choose, remember to use it consistently. Frequent changes in how invoices are marked can cause unnecessary confusion and questions from customers
Legal consequences of the different options
The way VAT-exempt businesses mark their invoices has different legal and practical consequences. Understanding these consequences is key to making the right decision.
Stating the legal basis for the exemption on the invoice gives the document maximum transparency and clarity. Customers know straight away why there is no VAT on the invoice, which reduces possible questions and doubts. This option is particularly recommended for firms working with professional customers.
A trading company from Wrocław, using the VAT exemption because it had not exceeded the PLN 240,000 limit, decided to put the note "Zwolniony z VAT - art. 113 ust. 1 ustawy o VAT" on its invoices. As a result, its customers, mainly other businesses, immediately understood the tax status of the transactions and did not raise further questions about the absence of VAT on the invoices.
Leaving out the legal basis on an invoice issued outside KSeF gives the business more freedom and simplifies issuing documents. There is no need to remember extra markings, which may matter when a large number of invoices is issued.
Not marking the legal basis on an invoice issued outside KSeF is not a breach of tax law in the case of the turnover-based exemption. The business has the right to choose and may use this option; in a structured invoice (KSeF), the basis of the exemption is given in field P_19A, P_19B or P_19C
The decision on how to mark invoices should also take marketing and image into account. Some businesses think that marking invoices as VAT-exempt may suggest to customers that they operate on a small scale. Others see it as a sign of professionalism and transparency.
Changes in the rules from 2014
Allowing VAT-exempt taxpayers to issue invoices from the beginning of 2014 was a significant change in the Polish tax system. Before that, VAT-exempt businesses could issue only bills (rachunki), which limited their ability to work with some customers. We also handle the books of VAT-exempt taxpayers — this is done by our accounting firm in Warsaw.
These changes came from an amendment to the VAT Act – the Act of 7 December 2012 amending the VAT Act and certain other acts (Dz.U. 2013 item 35), which from 1 January 2014 moved the invoicing rules into the Act (Articles 106a–106q). The main aim was to make life easier for small businesses and let them participate more fully in business dealings. Invoices are a more universal document than bills.
Since 2014, VAT-exempt taxpayers have issued invoices just like active VAT taxpayers – and they must do so when the buyer requests one within 3 months (Article 106b(3) of the VAT Act). This change made it easier for small businesses to work with customers who require invoices
Allowing businesses using the turnover-based exemption to leave out the legal basis on their invoices was a further step towards simpler procedures. The Regulation of the Minister of Finance of 3 December 2013 gave businesses additional flexibility in marking their documents; the same rule is now contained in § 3 point 3 of the regulation of 29 October 2021.
These changes responded to calls from business groups, which pointed to unnecessary complications in simple business situations. Being able to choose how to mark invoices lets each business adapt the solution to its own activity.
Practical recommendations for businesses
How a VAT-exempt business marks its invoices should be well thought through and suited to its activity. There is no single universal solution that works in every situation.
People starting a business should consider their growth plans and the kind of customers they expect. If they plan to work mainly with businesses, stating the legal basis on invoices may be a good solution. If they plan to serve mainly individual customers, they may consider leaving out extra markings.
Firms in sectors where professionalism and transparency are particularly important should consider marking their invoices in full. This applies especially to accounting, legal, consulting and IT services, where customers expect a high level of professionalism.
Businesses can change the way they mark invoices issued outside KSeF at any time. There is no obligation to use one solution for the whole period of the exemption. Markings can be adapted to changing business needs
It is also worth considering the technical aspects of accounting and invoicing systems. Some systems may have limited options for adjusting invoice markings. Before deciding, check what your software can do.
Businesses planning fast growth and expecting to exceed the exemption limit should prepare for a possible change in how they mark invoices. Moving from exempt to taxable status requires adjusting all processes, including how documents are marked.
Tax inspections and documentation
The way VAT-exempt businesses mark their invoices may matter during tax inspections. Inspection authorities pay attention to whether transactions are documented correctly and in line with the applicable rules.
Businesses that have decided to show the legal basis on their invoices should make sure it is correct and up to date. Citing the wrong provision may raise questions from inspection authorities and require additional explanations.
During a tax inspection, the authorities may check whether the markings on invoices match the business's actual tax status. It is important that the markings are up to date and reflect the actual use of the exemption
Businesses that leave out the legal basis on their invoices should be prepared for possible questions from inspectors about the absence of VAT on documents. It is worth having an explanation ready, based on the relevant legal provisions.
Documentation relating to the use of the VAT exemption should be kept regardless of how invoices are marked. This includes sales records, documents confirming that the limit has not been exceeded and other documents required by law.
International aspects and exports
VAT-exempt businesses planning to export or work with foreign customers should think particularly carefully about how they mark their invoices. Foreign customers may have different requirements for tax documentation.
In the case of exports of goods and services, VAT-exempt businesses must remember the special rules on documenting such transactions. Exports of goods are not exempt from VAT – for an active VAT taxpayer they are taxed at 0% (Article 41(4) of the VAT Act), while for a taxpayer using the small business exemption they are part of the sales (Article 2 point 22) covered by the exemption and count towards the limit. The export must be properly documented.
Invoices documenting foreign transactions issued by VAT-exempt businesses should also take into account the requirements for the particular transaction – for example, for services to businesses in the EU where the buyer accounts for the tax, the words "odwrotne obciążenie" (reverse charge) (Article 106e(1) point 18). This may require additional legal markings on the document
Working with customers from the European Union may require particular care in marking invoices. Some countries may have specific requirements for documenting transactions with VAT-exempt businesses.
Businesses planning to expand internationally should consult tax advisers specialising in international law. They can help choose invoice markings that will be accepted by foreign customers.
