VAT exemption on the sale of goods: the Polish Supreme Administrative Court confirms that intended use matters
The Polish Supreme Administrative Court has confirmed that the VAT exemption under Article 43(1)(2) of the Polish VAT Act may apply even where goods intended for VAT-exempt activities were never actually used before the sale. What matters is the intended use of the goods for exempt activities and the absence of a right to deduct VAT on their acquisition, import or production.
In its judgment of 20 November 2025 (case no. I FSK 2076/22), the Supreme Administrative Court addressed the scope of the VAT exemption provided for in Article 43(1)(2) of the Polish VAT Act. This provision covers the supply of goods used exclusively for VAT-exempt activities where the supplier had no right to deduct input VAT upon acquisition, import or production. The Court held that, for the purposes of this exemption, the intended use of the goods for exempt activities may be decisive, even if the goods were not actually used before their disposal.
The case concerned a doctor carrying out VAT-exempt medical activity. In the course of that activity, he constructed a specialised medical facility and acquired medical equipment and fittings without deducting VAT. Some of those assets were intended for exempt medical activity but had not been actually used before the sale of the property and assets. The tax authority argued that the exemption should apply only to goods actually used in exempt activity. The Court disagreed.
In its reasoning, the Court emphasised the purpose of the provision and the principle of VAT neutrality. It noted that a taxpayer who acquires or produces goods for exempt activity already bears the economic burden of VAT because no deduction is available. Taxing the subsequent sale in such circumstances could therefore lead to an outcome inconsistent with the purpose of the exemption. The Court also referred to differences between the language versions of Article 136(a) of the VAT Directive and stressed the need for a purposive interpretation consistent with CJEU case law.
This judgment is particularly relevant for the medical sector, financial and insurance institutions, educational entities and other taxpayers carrying out VAT-exempt activities. It confirms that, when assessing the applicability of the exemption, the intended use of the goods may be as important as their actual use.
If you need support with VAT exemptions or with assessing the VAT treatment of assets used in exempt activities, please contact us.