VAT in the energy industry – specifics of accounting for energy producers and distributors

1. Electricity as a supply for VAT purposes

A fundamental principle of the Polish VAT system is that all forms of energy are treated as goods (Article 2(6) of the VAT Act). This means that the sale of electricity constitutes a supply of goods for consideration subject to VAT under the general rules (Article 5(1)(1) of the VAT Act), rather than the provision of services. This distinction has significant practical consequences – it determines both the moment when the tax liability arises and the place of taxation of the transaction.

This position was also confirmed by the Court of Justice of the European Union, which, in its judgment of 20 April 2023 in Case C-282/22 (concerning the classification of the charging of electric vehicles), stated that the supply of electricity constitutes the principal supply determining the rules of taxation, even where it is accompanied by the provision of technical infrastructure.

Currently, the supply of electricity is subject to VAT at the standard rate of 23%.

2. The specific moment when the tax liability arises

One of the most distinctive features of VAT in the energy sector is the departure from the general rule regarding the tax liability. Pursuant to Article 19a(5)(4)(a) of the VAT Act, the tax liability for the supply of electricity, heat or cooling, and piped gas arises at the time the invoice is issued, rather than at the time of supply.

The legislator has also regulated situations where an invoice is not issued on time. Pursuant to Article 19a(7) of the VAT Act, if a taxpayer has not issued an invoice or has issued it late, the tax liability arises upon the expiry of the deadline for issuing the invoice, and where no such deadline has been specified – upon the expiry of the payment deadline.

In turn, pursuant to Article 106i(3)(4) of the VAT Act, an invoice for the supply of electricity should be issued no later than the expiry of the payment deadline.

A similar rule also applies to electricity distribution services.

The practical implications of this approach are far-reaching. In the energy sector, where settlements are periodic and invoices are often issued with a delay due to the specific nature of meter readings, correctly determining the point at which the tax liability arises requires precise monitoring of both invoice issue dates and payment deadlines.

3. Place of supply – special rules for energy in the electricity system

The provisions on the place of supply of electricity in the electricity system (Article 22(1)(5) and (6) of the VAT Act) differ significantly from the general rules. The legislator has provided for two regimes, depending on the status of the purchaser:

Supply to a reseller (Article 22(1)(5) of the VAT Act) – in the case of a supply of electricity within the electricity system to an entity whose primary purpose in purchasing the energy is to resell it within that system (with negligible own consumption), the place of supply is the place where the purchaser has its registered office (or its fixed place of business to which the energy is supplied).

In the case of a supply to an entity other than a reseller, the place of supply is the place where the purchaser actually consumes the energy. As regards energy not consumed by such a purchaser, the place of supply is deemed to be the place of its registered office.

This distinction is of key importance in cross-border transactions. A Polish energy company selling energy to a foreign trader (reseller) will not charge Polish VAT on this transaction – as the place of supply will be the registered office of the foreign purchaser. However, when selling to a foreign end-user, the place of supply is determined by the location of the actual consumption of the energy.

4. Reverse charge in cross-border transactions

The reverse charge mechanism remains of significant importance in the energy sector. Although since 1 November 2019 the domestic reverse charge has largely been replaced by the split payment mechanism, this mechanism continues to operate in cross-border trade.

Pursuant to Article 17(1)(5) of the VAT Act, a purchaser of electricity within the electricity system becomes a VAT taxable person if the supplier is an entity that has neither a registered office nor a fixed place of business in Poland.

The VAT Act also provides, in Chapter 1c of Section XIa, for the institution of temporary reverse charge (Articles 145e–145j of the VAT Act) concerning, inter alia, gas in the gas system, electricity in the electricity system and services relating to the transfer of greenhouse gas emission allowances. This mechanism, introduced pursuant to Article 199a of Directive 2006/112/EC, is an instrument for combating tax fraud in the energy sector and may be activated by the Minister responsible for public finance by way of a regulation.

5. Prosumers as VAT taxpayers – net billing and the prosumer deposit

The dynamic development of renewable energy sources (RES), in particular photovoltaics, has led to an increasing number of businesses becoming prosumers of renewable energy within the meaning of Article 2(27a) of the RES Act. From a VAT perspective, it is important to note that feeding surplus electricity into the electricity grid constitutes a supply of goods for consideration subject to VAT.

From 1 July 2022, a net-billing system has been in force, under which the value of energy fed into the grid is settled as a so-called prosumer deposit. The tax authorities consistently confirm that the VAT taxable amount is the value of this deposit, determined as the product of the quantity of electricity fed into the grid (after hourly balancing) and the market price of electricity (see the individual interpretation of the Director of the National Tax Information Service dated 1 April 2025, ref. 0112-KDIL3.4012.76.2025.1.MBN).

The prosumer should account for VAT, unless they benefit from the VAT exemption under Article 113(1) and (9) of the VAT Act (limit of PLN 240,000).

6. Re-invoicing of energy – issues relating to leases and complex services

A separate practical issue is the re-invoicing of electricity costs in the context of tenancy agreements. The key question concerns whether the supply of energy constitutes part of a complex tenancy service (taxed at the rate applicable to tenancy) or whether it constitutes a separate supply taxed at 23%.

The Court of Justice of the European Union has indicated in its case law (including the case of the Military Housing Agency, C-42/14) that if the tenant has the option of concluding an energy supply contract independently, and including energy in the rent would be artificial, the energy supply should be treated

7. KSeF in the energy sector – new challenges from 2026

The implementation of the mandatory National e-Invoice System (KSeF) poses an additional challenge for the energy sector.

The energy sector is one of those where the implementation of KSeF is particularly demanding due to the sheer volume of documents issued and the specific nature of periodic settlements. A significant simplification is the ability to use invoices with attachments (available from 1 January 2026), which allows technical specifications, measurement results or detailed energy consumption statements to be attached to the invoice. This functionality has been designed with the fuel, telecommunications and energy sectors in mind, amongst others.

Summary

VAT settlements in the energy sector require particular attention due to numerous deviations from the general rules. Key areas requiring constant monitoring include:

• special rules for determining tax liability linked to the date of invoice issuance rather than the date of supply,
• specific rules on the place of supply depending on the status of the purchaser (reseller vs. end user),
• the reverse charge mechanism in cross-border transactions, with specific rules regarding energy in grid systems,
• VAT obligations of prosumers in the net-billing model,
• challenges associated with the implementation of the mandatory KSeF.

Given the dynamic regulatory changes – both at national (KSeF) and EU level – ongoing monitoring of legislation and case law is essential for the correct settlement of tax in this sector.

Author

Mateusz Kowalski

Radca prawny, Senior Associate

I specialize in Polish tax law, particularly income taxes, as well as international tax law. My experience includes, among others. providing ongoing tax advisory services, preparing legal and tax opinions, drafting requests for individual interpretations, conducting tax reviews. I gained professional experience in Warsaw law firms.

View profile →