Introduction
If you are registered as a Sole Proprietor (Self-Employed Person) in Poland and conduct business activity, you have the right to purchase goods or services that are directly related to your business activity, and account for them as expenses or reduce your taxable base. Furthermore, if the purchase is made from a Polish legal entity, you can also deduct the input VAT (Value Added Tax). Such a purchase is often referred to as a “purchase on invoice” or “buying on account.”
For a sole proprietor, this is an important tool for tax planning: correctly processing an invoice (faktura) allows for savings on taxable income as well as on input VAT. It is important to note: expenses must be related to the business activity, have documentary evidence, and comply with legal requirements.
What Can Be Purchased on Invoice
Polish legislation does not contain an exhaustive list of goods and services that can be purchased “on invoice.” The main requirement is that expenses must be related to your business activity. According to guidelines on deductible expenses, a sole proprietor can classify costs as business expenses if they are “aimed at generating revenue or preserving the source of revenue.”
Examples:
- An IT specialist engaged in programming can purchase a laptop and software “on invoice.”
- A marketer can purchase advertising space rental, promotional services, or online advertisements.
- A tutor can purchase teaching materials, books, and reference guides.
- If a sole proprietor uses a personal car partially for client visits or deliveries, they can request an invoice at a gas station and partially allocate the fuel costs as business expenses.
It is also necessary to remember the VAT rules: input VAT can be deducted only if the expenses are related to the taxpayer’s business activity.
What Cannot Be Purchased on Invoice
Expenses that do not have a sufficient connection to your business activity or cannot be justified may be deemed non-deductible. For example: it would be difficult for a programmer to justify the purchase of an iron as work-related.
Although at the time of purchase the sole proprietor is not required to immediately prove the necessity of every purchase, in the event of an audit by the tax office (e.g., Urząd Skarbowy), it will be necessary to provide invoices and explanations. Therefore, maintaining clear documentation and having reasonable justifications is crucial.
There are also limitations on VAT deduction for certain categories of expenses: for example, fuel for a passenger car can only be deducted at 50% of the input VAT.
How to Process an Invoice Purchase
- Inform the seller in advance: state that you are purchasing as a sole proprietor and you need an invoice with your NIP (Tax Identification Number).
- When purchasing from a Polish seller — ensure that the shopping cart or checkout process has an option to enter the NIP and request an invoice. If no such option exists, contact the seller.
- If you make a purchase from a foreign legal entity, note: this is considered import of goods or services, and there may be additional tax obligations (e.g., reverse charge mechanism). In such cases, consulting an accountant is recommended.
- After receiving the invoice, verify that it is correctly issued: it should contain details of the seller, the buyer (your NIP), a detailed description of the goods/service, net amount, VAT amount, tax rate, and date.
- Accounting entry: expenses are recorded according to the taxation system you use (e.g., general rules, flat-rate tax, lump sum). Input VAT is deducted in the VAT-7/VAT-EU declaration if you are registered as a VAT payer.
As the Business Start company provides legal and accounting services, we accept your processed invoices for further calculation and provide consultations on complex cases.
Frequently Asked Questions
Can I buy fuel at a gas station and deduct the full input VAT?
If you use a car exclusively for business activity and it is registered as a vehicle intended solely for such use, then there is a chance to deduct the full input VAT. However, for an ordinary passenger car also used for personal purposes, the standard deduction is 50%.
Can I make a purchase from a foreign seller and include it on an invoice?
Yes, it is possible, but such transactions may be classified as import of goods or services, and then transfer pricing rules or the reverse-charge mechanism may apply. It is recommended to consult an accountant before making such a purchase.
Which expenses can be immediately included as expenses without further depreciation?
If the price of the purchased asset does not exceed the allowable threshold (according to asset depreciation rules), the purchase can be immediately accounted for as a current expense. However, if the cost is higher, depreciation according to the rules is required.
Do I need to justify expenses immediately at the time of purchase?
No, at the time of purchase you are not required to immediately provide justification. However, you are responsible as a sole proprietor for ensuring that expenses correspond to your business activity—in case of an audit, the tax office may request invoices and explanations.
