[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"advice-en-cash-method-vat-settlement":3},{"slug":4,"title":5,"excerpt":6,"body":7,"datePublished":8,"dateModified":8},"cash-method-vat-settlement","Cash method of VAT in 2026 — when it pays off and when it hurts","Cash-based VAT for a small taxpayer: EUR 2 million limit, notification, quarterly returns, invoice annotation and an example of when it pays off.","\u003Cp>The cash method shifts the moment of VAT settlement to the day the client actually pays. It can be chosen by small taxpayers, meaning businesses whose sales including tax did not exceed the equivalent of EUR 2 million in the previous year. It is mainly worthwhile with long payment terms and clients who pay late; less so when the company buys or invests heavily, as VAT on purchases is deducted only after they have been paid.\u003C\u002Fp>\n\n\u003Ch2>How the cash method works\u003C\u002Fh2>\n\u003Cp>Under standard settlement, the tax obligation usually arises at the moment the service is performed or the supply is made, and for services invoiced in periods — most often at the end of the reporting period. The tax must be paid even if the client's money has not yet arrived. Under the cash method (\u003Ca href=\"https:\u002F\u002Fapi.sejm.gov.pl\u002Feli\u002Facts\u002FDU\u002F2026\u002F1263\u002Ftext.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">Article 21 of the VAT Act\u003C\u002Fa>) the rule is reversed:\u003C\u002Fp>\n\u003Cul>\n\u003Cli>for sales to an \u003Cstrong>active VAT payer\u003C\u002Fstrong>, the tax obligation arises on the day payment is received — in whole or in part,\u003C\u002Fli>\n\u003Cli>for sales to \u003Cstrong>other buyers\u003C\u002Fstrong> (consumers, VAT-exempt businesses) — on the day of payment, but no later than the 180th day from the performance of the service or release of the goods,\u003C\u002Fli>\n\u003Cli>a partial payment triggers the obligation only in that part.\u003C\u002Fli>\n\u003C\u002Ful>\n\u003Cp>The other side of the same rule applies to purchases: the right to deduct VAT from purchase invoices arises no earlier than in the return for the period in which the company paid them (Article 86(10e)). It is not possible to apply the cash method only to sales.\u003C\u002Fp>\n\n\u003Ch2>Who can choose it\u003C\u002Fh2>\n\u003Cp>The small-taxpayer threshold is EUR 2,000,000 of gross sales in the previous year. It is converted to złoty at the NBP average rate from the first business day of October of the previous year, rounded to PLN 1,000 — so the amount in złoty changes each year. For intermediaries, agents and brokerages the threshold applies to commissions and is EUR 45,000.\u003C\u002Fp>\n\u003Cp>The cash method does not apply, among others, to intra-Community supplies of goods (WDT) and to some transactions via intermediary platforms. The special rules for the tax point provided for certain services also remain unchanged.\u003C\u002Fp>\n\n\u003Ch2>Formalities: notification, quarters and the invoice annotation\u003C\u002Fh2>\n\u003Col>\n\u003Cli>\u003Cstrong>Notification to the tax office\u003C\u002Fstrong> — in writing, by the end of the month preceding the period from which the company wants to apply the cash method.\u003C\u002Fli>\n\u003Cli>\u003Cstrong>Quarterly settlement\u003C\u002Fstrong> — a small taxpayer on the cash method files JPK_V7K for quarters, by the 25th day of the month following each quarter (Article 99(2)). Monthly settlement is not available for them.\u003C\u002Fli>\n\u003Cli>\u003Cstrong>Annotation on invoices\u003C\u002Fstrong> — every sales invoice must contain the words \"metoda kasowa\" (cash method).\u003C\u002Fli>\n\u003Cli>\u003Cstrong>Payment records\u003C\u002Fstrong> — the accounting system must assign incoming and outgoing payments to specific invoices, including partial payments.\u003C\u002Fli>\n\u003C\u002Fol>\n\u003Cp>A withdrawal is possible no earlier than after 12 months of applying the method, after notifying the tax office by the end of the quarter in which the company was still using it. The right to the cash method expires automatically from the month following the quarter in which the small-taxpayer threshold was exceeded.\u003C\u002Fp>\n\n\u003Ch2>Example: when the cash method really helps\u003C\u002Fh2>\n\u003Cp>A marketing agency issues an invoice to a client on 30 June 2026 for PLN 40,000 net and PLN 9,200 VAT, with a 60-day payment term. The client pays late — on 15 September.\u003C\u002Fp>\n\u003Ctable>\n\u003Cthead>\u003Ctr>\u003Cth>\u003C\u002Fth>\u003Cth>Standard method (monthly return)\u003C\u002Fth>\u003Cth>Cash method (quarterly)\u003C\u002Fth>\u003C\u002Ftr>\u003C\u002Fthead>\n\u003Ctbody>\n\u003Ctr>\u003Ctd>Period of output VAT\u003C\u002Ftd>\u003Ctd>June 2026\u003C\u002Ftd>\u003Ctd>Q3 2026\u003C\u002Ftd>\u003C\u002Ftr>\n\u003Ctr>\u003Ctd>Deadline to pay PLN 9,200 to the tax office\u003C\u002Ftd>\u003Ctd>27 July 2026 (25 July is a Saturday)\u003C\u002Ftd>\u003Ctd>26 October 2026 (25 October is a Sunday)\u003C\u002Ftd>\u003C\u002Ftr>\n\u003Ctr>\u003Ctd>Who finances the tax for 2.5 months\u003C\u002Ftd>\u003Ctd>the agency\u003C\u002Ftd>\u003Ctd>no one — the tax is paid from the payment received\u003C\u002Ftd>\u003C\u002Ftr>\n\u003C\u002Ftbody>\n\u003C\u002Ftable>\n\u003Cp>If the client never paid, under the cash method the agency would not report VAT on this invoice at all. Under the standard method, it would have to use \u003Ca href=\"\u002Fen\u002Fadvice\u002Fbad-debt-relief-ulga-na-zle-dlugi\">bad debt relief\u003C\u002Fa>, which requires waiting 90 days past the due date.\u003C\u002Fp>\n\n\u003Ch2>The cash method does not change income tax\u003C\u002Fh2>\n\u003Cp>A common misunderstanding: choosing the cash method for VAT does not shift revenue in PIT or CIT. In income tax, business revenue consists of amounts due, even if they have not yet been received (Article 14(1) of the PIT Act). An invoice from June still increases revenue in June, and the income tax advance has to be calculated on that amount, even though VAT on it will not be paid until the money comes in.\u003C\u002Fp>\n\u003Cp>In practice this means two separate sets of deadline records: revenue by the date of service performance and VAT by the date of payment. A well-configured invoicing program keeps both automatically — our \u003Ca href=\"\u002Fen\u002Fservices\u002Finvoices\u002Ffaktura-vat\">VAT invoice handling\u003C\u002Fa> service helps with this.\u003C\u002Fp>\n\n\u003Ch2>When the cash method does not pay off\u003C\u002Fh2>\n\u003Cul>\n\u003Cli>\u003Cstrong>Large purchases or investments\u003C\u002Fstrong> — if the company buys equipment in instalments or on deferred terms, VAT is only recovered after each instalment is paid. When input VAT exceeds output VAT, the method delays the refund.\u003C\u002Fli>\n\u003Cli>\u003Cstrong>Clients who pay immediately\u003C\u002Fstrong> — for prepayments or payment within a few days, the cash-flow benefit is marginal and formalities grow.\u003C\u002Fli>\n\u003Cli>\u003Cstrong>Contractors buying from a business on the cash method\u003C\u002Fstrong> — their deduction also depends on payment, which some see as an inconvenience.\u003C\u002Fli>\n\u003Cli>\u003Cstrong>Need for monthly settlement\u003C\u002Fstrong> — e.g. with regular VAT refunds, which arrive less often under a quarterly regime.\u003C\u002Fli>\n\u003C\u002Ful>\n\n\u003Ch2>How to decide — three questions\u003C\u002Fh2>\n\u003Col>\n\u003Cli>What is the average time from invoice issue to payment? Above 30–45 days the benefit is usually noticeable.\u003C\u002Fli>\n\u003Cli>Are large VAT-bearing purchases planned in the coming year, paid in instalments or with deferral?\u003C\u002Fli>\n\u003Cli>Is the company ready for quarterly settlement and precise tracking of payments?\u003C\u002Fli>\n\u003C\u002Fol>\n\u003Cp>General rules of the tax, rates and deadlines are covered in the guide to \u003Ca href=\"\u002Fen\u002Fadvice\u002Fwhat-is-vat-in-poland\">VAT in Poland\u003C\u002Fa>.\u003C\u002Fp>\n\n\u003Ch2>How Good Balance can help\u003C\u002Fh2>\n\u003Cp>We check on the company's data whether the cash method will improve cash flow, prepare the notification to the tax office and run quarterly settlements as part of \u003Ca href=\"\u002Fen\u002Fservices\u002Faccounting\u002Fsimplified-accounting\">simplified accounting\u003C\u002Fa>. We also make sure invoices carry the required annotation and that deductions are recognised only after payment.\u003C\u002Fp>","2026-10-09"]