Suspending business activity is a tool increasingly used by entrepreneurs, especially in situations where running a business becomes uneconomical or temporarily difficult. Although the decision to suspend operations brings certain administrative reliefs, it also has significant implications for VAT (Value Added Tax).

Legal basis for business suspension

The possibility of suspending business activity is regulated by the Entrepreneurs’ Law Act of 6 March 2018. This option is available to entrepreneurs who do not employ workers (with some exceptions, e.g. employees on maternity leave). Suspension also has important consequences under the VAT Act of 11 March 2004.

VAT reporting during suspension

The main consequence of suspension is the lack of obligation to submit VAT returns for the settlement periods covered by the suspension. This means that the taxpayer does not need to submit “zero” returns. 

However, this does not mean a complete exemption – the obligation to file may still arise in cases such as: 

• intra-community acquisition of goods (WNT), 
• import of goods or services, 
• when suspension covers only part of a settlement period, 
• the need to adjust input tax (e.g. annual adjustment). 

Example? A taxpayer who sells a company car during suspension must submit a JPK_V7 return for the month in which the sale took place. 

As a general rule, a suspended entrepreneur cannot conduct ongoing business activity or generate income from it. The law, however, provides exceptions. Therefore, under the VAT Act, a taxpayer must file a return if any taxable activity is carried out during suspension. 

Rights and obligations of a taxpayer who suspended business

During suspension, the taxpayer:

• may perform activities necessary to maintain or secure the source of income, including terminating previous contracts, 
• may receive payments and must settle liabilities incurred before the suspension date, 
• may sell company assets and equipment, 
• has the right or obligation to participate in court, tax, or administrative proceedings related to pre-suspension business activity, 
• must fulfill all statutory obligations, 
• may earn financial income (e.g. interest) from activities conducted before suspension, 
• may be subject to tax or business inspections, 
• may appoint or dismiss a succession administrator. 

Business suspension without inventory

Unlike business termination, suspending activity does not require preparing a physical inventory, regardless of how long the suspension lasts. This simplification is explicitly provided for in Article 14(3) of the VAT Act. 

How does business suspension affect your VAT registration?

If the business remains suspended for at least six months, the tax office removes the taxpayer from the VAT register. If the entrepreneur performs taxable activities during suspension, they must notify the tax office – otherwise, they lose active VAT taxpayer status. After resuming operations, re-registration occurs automatically without submitting a new VAT-R form. 

Can you still claim VAT refunds when business is suspended?

A suspended taxpayer retains the right to deduct VAT, even if temporarily removed from the VAT register. They can deduct VAT on expenses related to maintaining the business, such as leasing or preparatory investments. If the tax office denies immediate deduction, the taxpayer may claim it in the first VAT return after resuming activity. 

Even a taxpayer planning to close the business permanently retains the right to deduct VAT. This is confirmed by the CJEU judgment in case C-32/03 (Fini H.), which recognized that activities related to business closure (e.g. paying rent) still constitute part of economic activity. 

Purchases during business suspension

Sellers must issue invoices with the buyer’s VAT number even if the buyer’s activity is suspended. The suspended entrepreneur remains a taxable person, and purchases made during suspension may still relate to future business investments. 

VAT corrections during business suspension

A taxpayer must submit VAT adjustments and invoice corrections during suspension. This applies to both issued and received invoices, since many business events (such as returns, discounts, or corrections) have long-term tax implications. 

Using a company car during business suspension

A taxpayer who suspended business activity does not lose the right to deduct 50% of VAT on car-related expenses, even if the car is used only for private purposes during this period. The law assumes that in mixed-use systems, private use risk is already factored in. 

Even during suspension, a company car may be used for purposes related to the business, such as handling formalities connected with suspension or preparing for resumption. Vehicle expenses are often long-term (e.g. technical inspections, battery replacement). 

Therefore, if a 50% VAT deduction applies under normal conditions, it also applies during suspension – including for repair or maintenance costs, without triggering the need for VAT adjustment. 

However, the law does not explicitly cover extreme cases, such as using the company car exclusively for personal purposes during a long trip. In such situations, it may be safer to refrain from deducting VAT on fuel purchases. 

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Text based on: INFORLEX