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Subsidy under the PFR Financial Shield without VAT


The Director of the National Revenue Information Service has confirmed that the taxpayer is not obliged to take into account in the tax base the subsidy received under the Financial Shield of the Polish Development Fund (individual tax ruling from August 27, 2020 No. 0113-KDIPT1-1.4012.396.2020.4.AK).

The application for an interpretation was submitted by a company conducting business in the field of rental of commercial premises to businesses and individuals. Due to the difficult situation caused by the COVID-19 epidemic, the company received a financial subsidy in the amount of  PLN 216,000 under the Financial Shield of the Polish Development Fund for Small and Medium-sized Enterprises. The subsidy is dedicated to finance current business activities, including the payment of interest on loans, employee remuneration and covering the maintenance costs of leased property, etc. Importantly, the subsidy does not constitute a subsidy for the services provided or goods sold. The company’s  customers will not pay lower prices thanks to the subsidy. In the future, the Company will be obliged to repay the unremitted part of the subsidy.

The Company had doubts whether the subsidy constituted a base for VAT, on which value added tax at the rate of 23% should be paid. 

The Director of the National Revenue Information Service held that the subsidy is not subject to VAT. Although the tax base includes subsidies, grants and other subsidies of similar nature, but only those which have a direct impact on the price of the goods or services sold. For a subsidy to increase the taxable amount, it would therefore have to be granted in order to finance a specific taxable activity and to cover part of the price of a specific service or product, or to compensate the business for the supply at reduced prices.

Subsidies which cannot be connected with a particular sale, do not increase the base for taxation. A general subsidy received by the company to cover its operating expenses does not increase the tax base and is therefore not taxable. Such a standpoint is also widely confirmed in the CJEU case-law cited by the authority (e.g. judgments C-184/00 from November 22, 2001 Office des produits wallons ASBL against Belgian State and C-353/00 from June 13, 2002 Keeping Newcastle Warm Limited against Commissioners of Customs and Excise).

On those grounds, the Director of the KIS (National Revenue Information Service) stated that the subsidy received will not result in a situation where a specific performance is provided in return for specific remuneration. Thereby, given that the subsidy from the PFR will be used to finance the Company's current business activities, it does not affect the price of the services provided or goods sold and therefore does not constitute the basis for taxation with value added tax. Consequently, the subsidy received under the Polish Development Fund Financial Shield is not subject to VAT.


Paulina Włodkowska, Tax Consultant, ATA Tax Sp. z o.o.

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