Running your own business isn't just about growing your business but also constantly facing tax challenges. One topic that keeps entrepreneurs awake at night, especially at the beginning of the year, is the annual VAT adjustment. It sounds serious and complicated, but it's actually based on a simple premise. Let's explore what it's all about, who it affects, and, above all, how to do it wisely (or how to avoid it legally).
What exactly is the annual VAT correction?
If your company conducts mixed activities, meaning it simultaneously performs both VAT-taxable and VAT-exempt activities (e.g., in the training industry), you only partially deduct VAT from your costs. The point is that when you deduct this tax in individual months throughout the year, you do so "preliminarily," using a pre-calculated "preliminary proportion.".
Because economic life can be dynamic, the actual ratio of taxable to exempt sales often turns out to be different. Therefore, after the end of the 2025 tax year, you are required to calculate your final ratio based on your actual sales over the previous twelve months.
What we commonly call the "annual adjustment" is simply the difference between what you "preliminarily" deducted over the course of the year and what you should have deducted once you know the actual percentage of your sales at the end of the year. Importantly, this can be either a "plus" adjustment (when the final proportion turned out to be higher) or a "minus" adjustment (when the result after recalculating the proportion decreased). You should report this value soon – namely in the JPK_V7 declaration submitted for January 2026 (deadline: February 25th) or in the declaration submitted for the first quarter of 2026 (deadline: April 25th).
What types of costs are subject to adjustment?
It's worth noting that adjustments don't apply the same way to every business expense invoice you have. The VAT Act significantly differentiates the method of making adjustments based on the type and value of the assets you acquire:
- Regular costs and less expensive equipment (under PLN 15,000): These are adjusted on a one-time basis at the end of the year in which the purchase was put into use by the company. This approach applies, for example, to costs for various utilities, consumables, and the purchase of small equipment for your employees.
- Cars and other machinery (over PLN 15,000): In this case, the legislator spread the correction period over 5 consecutive years - in practice, this means that each year the taxpayer corrects 1/5 of the amount of tax initially deducted.
- Real estate: Here we are dealing with the longest period - this correction is spread over a period of 10 years, with each subsequent year introducing an adjustment of only 1/10 of the amount of tax thus calculated.
When correction is not needed at all
What if you discover discrepancies after calculating your tax year? Sometimes regulations make life easier and stipulate that, despite the differences, you don't have to make any adjustments. Such an exemption applies when:
- The difference is symbolic: The difference between the initial proportion and the actual proportion ultimately amounted to a maximum of two percentage points.
- You deducted too much VAT, but the correction will still be low: Your final (actual) proportion may have fallen below the initial proportion, but the total VAT amount calculated for the correction will be PLN 10,000. Formally, this means you deducted too much during the year, but the state doesn't force you to compensate for such small differences. Very often, retaining this higher amount of previously deducted tax is a much more beneficial solution for the company, and importantly, completely legal.
However, it's important to remember that the right to opt out of the correction is blocked if your company uses the so-called VAT pre-ratio and if you make purchases for purposes beyond traditional business activity. The presented simplifications apply only to entities settling tax using the sales ratio alone.
This article is for informational purposes only and does not constitute legal advice.
The law is current as of February 20, 2026.
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