Selling services together with a free gift in the form of goods is a common business practice, especially in promotional campaigns and loyalty programmes. However, it raises important questions about proper documentation and cash register (kasa fiskalna) obligations. The first question is whether the gift is a separate, free transfer of goods or part of a paid service that the customer pays for. The answer determines whether you have to charge separate VAT on the gift and whether you have to record it. Another cash register question is when to issue a receipt for a payment after hours.
The issue is particularly important when the buyer of the service is a private individual who does not run a business. In such cases the business owner must carefully analyse the nature of the gift, the conditions on which it is given, its value and the circumstances of the transaction in order to meet their tax and documentation obligations correctly.
A gift given with the sale of a service may be assessed in two ways: as a free transfer of goods (Article 7(2) of the VAT Act) or as part of a single transaction for consideration, where the customer receives it within the price of the service. Under the first approach, what matters is the right to deduct VAT on the purchase of the gift and the low-value gift limit
Under the first view, the gift is a separate, free supply of goods on which VAT is charged, except for low-value gifts and samples. This was the approach of the Director of National Tax Information (KIS) in the individual tax ruling of 19 August 2024 (0114-KDIP4-2.4012.272.2024.2.AS): an in-kind bonus given after additional promotion conditions were met (registration, purchase of a set number of products), which might never have been given at all, was not part of the price but a free transfer. Under the second view, where the customer receives the gift automatically, for the same price as the service or goods, they also pay for the gift – so there is no free transfer and no separate VAT is charged on it. The CJEU ruled this way in its judgment of 5 October 2023 (C-505/22, Deco Proteste) on a gift for a subscription, and the tax authority did so in the ruling of 9 September 2016 (IBPP1/4512-383/16-1/MS), where the cost of the gift was part of the price calculation of the main goods.
VAT rules on the free transfer of goods
The basis for taxing the free transfer of goods is Article 7(2) of the VAT Act, which in certain cases treats a free supply in the same way as a supply for consideration. This provision is fundamental for assessing tax obligations related to gifts that accompany the sale of services.
Under this provision, a supply of goods also includes the free transfer by the taxpayer of goods belonging to their business. This applies in particular to the transfer or use of goods for the personal purposes of the taxpayer or their employees, including former employees, partners, shareholders, members of cooperatives and their household members, members of the governing bodies of legal persons and members of associations, as well as all other gifts.
The key condition for taxing a free transfer is whether the taxpayer was entitled, in whole or in part, to reduce output VAT by the input VAT on the purchase, import or production of those goods or their components
However, the legislator provided important exceptions to this rule. Article 7(3) of the VAT Act states that the above provision does not apply to low-value gifts and samples transferred for purposes related to the taxpayer's business.
Low-value gifts are precisely defined in the rules. They are goods transferred by the taxpayer to one person with a total value not exceeding PLN 100 (excluding tax) in the tax year, provided the taxpayer keeps records that make it possible to identify these persons. Alternatively, if the transfer has not been entered in such records, low-value gifts are goods whose unit purchase price excluding tax, or, if there is no purchase price, unit production cost, does not exceed PLN 20.
Low-value gifts of up to PLN 100 per person per year, where records of recipients are kept, or up to PLN 20 per item without such records, are outside the scope of VAT. This also applies to samples transferred for purposes related to the business
If the gift is treated as a free transfer, this means that VAT applies to the free transfer of any goods directly related to the business that are not samples or low-value gifts, provided the taxpayer was entitled to deduct VAT on their purchase.
Obligation to record on a cash register
Whether gifts must be recorded on a cash register is governed by Article 111(1) of the VAT Act, which requires taxpayers selling to private individuals who do not run a business and to flat-rate farmers to keep sales records using cash registers.
The key point here is the definition of sale in Article 2(22) of the VAT Act, which covers supplies of goods and services for consideration. However, because Article 7(2) of the VAT Act treats a free supply in the same way as a supply for consideration, the tax authorities take the view that the free transfer of gifts may be subject to the obligation to record it on a cash register. If, however, the gift is part of the price of the service (the second view), the cash register records the sale at the price paid by the customer, with no separate entry and no separate VAT for the gift; where the gift is goods taxed at a different rate from the service, the tax authority stated in the 2016 ruling that each element of the set is taxed at the rate applicable to it.
Under Article 111(1) of the VAT Act, taxpayers selling goods to private individuals who do not run a business must keep records using cash registers. According to the tax authorities, this also applies to free supplies treated as supplies for consideration under Article 7(2)
The situation is, however, significantly changed by the regulation on exemptions from the obligation to record sales on a cash register (Regulation of the Minister of Finance of 17 December 2024, Journal of Laws (Dz.U.) 2024, item 1902). Under § 2(1) of that regulation, the activities listed in its annex are exempt from the obligation to keep records in a given tax year, but no longer than until 31 December 2027.
Item 46 of the annex lists the activities referred to in Article 7(1)(5) and (2) and Article 8(2) of the VAT Act. This means that a transfer of gifts classified as a free supply of goods other than low-value gifts and samples does not have to be recorded on a cash register because of this exemption.
- Establish whether the gift is part of the price of the service or a free transfer – and in the latter case, whether it is a low-value gift or a sample
- Assess whether you were entitled to deduct VAT on purchasing the gift
- Identify the type of goods transferred according to the categories in the regulation
- Determine whether the gift is exempt from recording on a cash register
- Decide how to document the operation
Exceptions to the cash register exemption
The exemption described above is not absolute and does not apply to the free supply of certain categories of goods listed in § 4(1)(1) of the regulation on exemptions from the obligation to record sales on a cash register.
For example, an interpretation of the Director of the Tax Chamber in Bydgoszcz of 28 October 2008 (No. ITPP1/443-673b/08/KM), issued under the rules in force at the time, stated that the free transfer of a prize in kind in the form of an mp3 player had to be recorded on a cash register. This shows that the nature of the goods transferred is decisive in assessing cash register obligations. The type of goods also matters when a business sells its own assets, as we explain in our article on sale of fixed assets and the cash register obligation.
If the gift consists of goods listed in § 4 of the regulation, such as electronic equipment, computers, perfumes or optical products, the free transfer must be recorded on a cash register despite the general exemption
The detailed list of goods that must be recorded includes, among others:
- Desktop and portable computers, including laptops and tablets, and peripherals for them, game consoles, parts for computers and consoles
- Electronic products, including television and radio receivers, record players, loudspeakers, telephones, including smartphones, smartwatches, aerials, displays, monitors, image and sound recording or playback devices, navigation devices, non-volatile memory devices, tapes, disks, alarm devices
- Optical products, including binoculars, telescopes, projectors
- Photographic equipment, including digital and conventional cameras, lenses, objectives, video cameras, film projectors
- Recorded and blank digital and analogue data carriers
- Perfumes and eaux de toilette
| Category of goods | Recording obligation | Legal basis | Examples |
|---|---|---|---|
| Low-value gifts | None | Article 7(3) of the VAT Act | Gadgets up to PLN 20 |
| General goods | Exemption | § 2(1) of the regulation | Clothing, food products |
| Electronic equipment | Obligation | § 4 of the regulation | Smartphones, laptops |
| Perfumes | Obligation | § 4 of the regulation | Eaux de toilette, perfumes |
Where prizes in kind are transferred free of charge, which is treated as a taxable supply for consideration under Article 7(2) of the VAT Act if there was a right to deduct input VAT, the nature of the goods transferred determines whether the exemption from recording turnover on a cash register can be used. Businesses using more than one device should also know the rules for VAT settlement of sales from several cash registers.
If a taxpayer gives a gift listed in § 4 of the regulation, that activity, under the exclusion in that provision, must be recorded on a cash register regardless of the general exemption
This rule is intended to place goods of high value or of a special nature, which are often the subject of tax irregularities, under particular control. Business owners must therefore analyse very carefully the type of gifts they give in order to determine their obligations correctly.
Practical aspects of documenting gifts
The free transfer of gifts may benefit from the exemption from recording on a cash register, but this does not rule out the need to pay VAT on such a free transfer under Article 7(2) of the VAT Act. This raises the important question of how to document such a business event correctly.
Article 106b of the VAT Act requires sales, i.e. supplies for consideration, to be documented with an invoice (faktura). Consequently, the free transfer of gifts will not be documented with a standard VAT invoice as referred to in Article 106e of the VAT Act, because it is not for consideration in the traditional sense.
Giving gifts that are not samples or low-value gifts and that are taxable under Article 7(2) of the VAT Act can be confirmed with an internal document, for example a summary internal document issued at the end of the month. Internal invoices were abolished on 1 January 2014
Documenting the free transfer of goods requires particular attention from business owners. Although there is no obligation to issue a VAT invoice within the meaning of the rules on sales, the operation must be properly documented for the purposes of settling output VAT.
The solution is to issue internal documents, which serve solely settlement and documentation purposes. Such documents can be issued periodically, for example at the end of the month, as summary documents covering all free transfers of gifts made in the period.
A business running a beauty salon organised a promotional campaign in which customers using services worth more than PLN 200 could collect a free gift in the form of a cosmetics set worth PLN 80 after joining a loyalty programme. The business treated handing over the set as a free transfer, kept no records of recipients and the purchase price of the set exceeded PLN 20, so it issued an internal document at the end of the month documenting the free transfer of the cosmetics and paid VAT on them, because it had been entitled to deduct VAT on their purchase. If the promotion terms had provided that every customer receives the set automatically within the price of the service, with no additional conditions, the salon could have considered treating the whole as a single transaction for consideration.
In the JPK_VAT file (JPK_V7 – VAT return with records, SAF-T file), the taxpayer should mark such an internal document, which is the basis for paying output VAT, with the symbol WEW. This marking allows the tax authorities to identify the nature of the document correctly and check that the VAT settlement is correct.
- Internal documents record the free transfer of gifts for VAT purposes
- Documents can be issued in summary form at the end of the settlement period
- In the JPK_VAT file, use the symbol WEW for internal documents
- The value and type of goods transferred must be stated precisely
- The documentation must reflect the taxable amount in line with the VAT rules
Valuing gifts for tax purposes
Correct valuation of gifts is a key element of settling VAT correctly. The tax rules require the taxable amount for the free transfer of goods to be determined, which in practice means establishing the purchase price or production cost of the items transferred.
Under Article 29a(2) of the VAT Act, the taxable amount for a free supply of goods is the purchase price of those goods or similar goods, or, if there is no purchase price, the production cost, excluding VAT. Both values are determined as at the moment the goods are transferred.
The taxable amount for the free transfer of gifts is the purchase price of the goods or similar goods excluding VAT, or, if there is none, the production cost, determined at the moment of transfer. The provision does not refer to the selling price or market value
In practice, this means that business owners must keep detailed records of the purchase or production costs of goods intended as gifts. This is particularly important for goods bought at different prices in different periods, where an appropriate inventory valuation method may be needed.
In addition, business owners must remember to apply the correct VAT rate. The tax rate for a free transfer should be the rate that would apply to a sale of the goods for consideration. This means the goods must be classified correctly for VAT rate purposes.
Records and control of gifts
Keeping proper records of gifts is essential both for settling taxes correctly and for any tax inspections. Business owners should develop documentation systems that give full control over the process of giving gifts.
The records should include all relevant information about gifts, including the date of transfer, the type and value of the goods, the details of the person receiving the gift, the legal basis for the transfer and the method of tax settlement. It is particularly important to keep records that make it possible to identify the recipients of low-value gifts.
Gift records must make it possible to identify the recipients of low-value gifts in order to use the limit of PLN 100 per person per year. Without such records, the limit of PLN 20 per gift applies
Business owners should also consider personal data protection when keeping records of gift recipients. Processing personal data for this purpose must comply with the GDPR, which may require appropriate information clauses and consents to data processing.
- Determine the value of the gift on the basis of its purchase price or production cost
- Check the correct VAT rate for the type of goods
- Determine the taxable amount in line with the VAT Act
- Issue an internal document recording the operation
- Make the appropriate entries in the VAT records and accounting books
- Mark the document with the symbol WEW in the JPK_VAT file
Consequences of incorrect documentation
Incorrect documentation of gifts can have serious financial and legal consequences for business owners. The tax authorities increasingly pay attention to whether free supplies of goods are settled correctly, because of the potential for abuse in this area.
The most common mistakes concern a wrong assessment of whether a gift is a low-value gift, incorrect valuation of the goods transferred, failure to document the operation or incorrect marking in JPK_VAT files. Each of these mistakes may result in a tax arrears assessment with interest and penalties.
Incorrect settlement of gifts may result in an assessment of VAT arrears with late-payment interest and tax penalties. Cases of deliberately understating the taxable amount or concealing free supplies are treated particularly strictly
The tax authorities may also question whether the exemptions from recording on a cash register were applied correctly, particularly for high-value goods or goods whose classification raises doubts. Business owners should therefore be particularly careful and seek specialist advice in doubtful cases.
An IT company organised a competition for customers in which the prizes were laptops worth PLN 3,000 each. The company did not record the transfer of the prizes on a cash register, believing it was covered by the exemption. During an inspection it turned out that laptops must be recorded under § 4 of the regulation, which resulted in a penalty and an assessment of tax arrears.
Tax planning for gifts
Proper tax planning can significantly reduce the burden related to giving gifts. Business owners should consider different strategies that allow them to reduce tax costs while remaining compliant with the rules.
One of the basic strategies is to set the value of gifts deliberately so that they fall within the limits for low-value gifts. This means planning promotional campaigns with gifts worth no more than PLN 20 per item or PLN 100 per person per year where appropriate records are kept.
Where the gift is given only with the purchase of the service, automatically and within its price, and this follows from the promotion conditions or terms, you can consider treating the whole as a single transaction for consideration – it is worth documenting this with the promotion terms and the price calculation. However, the tax authorities assess each promotion against its own conditions, so if in doubt, or where the campaign is large, it is safer to apply for your own individual tax ruling. Replacing gifts in kind with vouchers or a discount also requires individual analysis under the VAT rules and other taxes.
- Plan the value of gifts within the limits for low-value gifts
- State in the promotion terms whether the gift is part of the price of the service
- Keep records of recipients to use the higher limit of PLN 100
- Analyse the type of goods with regard to the cash register obligation
- Document all operations in line with the tax requirements
