Poland to slash VAT rates on beauty services by 15%, providing relief to businesses

12 Mar 2024 --- Poland intends to lower the VAT rates on beauty services to level the playing field for companies in the beauty industry that currently pay higher VAT rates than others.

A spokesperson at Poland’s Ministry of Finance tells Personal Care Insights it is “currently working on regulations aimed at reducing the VAT rate on certain cosmetic services from 23% to 8%, as of April 1, 2024.”

“Currently, hairdressing services are subject to an 8% VAT rate in Poland. The proposed regulations envisage extending the scope of preferences to other services provided in the so-called ‘beauty sector.’”

“As a result, the proposed solution should contribute to improving the financial situation of entrepreneurs providing services in this sector,” continues the spokesperson.

According to data from Poland’s Ministry of Economic Development and Technology, the country ranks fifth in the EU in terms of the size of its cosmetics market. The industry is predicted to expand at a rate of 3% annually after surviving the pandemic and could reach €4.5 billion (US$4.9 billion) this year.According to data from Poland’s Ministry of Economic Development and Technology, Poland ranks fifth in the EU in terms of the size of its cosmetics market.

The number of recently founded cosmetics companies is another indication of the growth in the Polish cosmetics market, notes the Ministry, with SMEs growing by almost two-thirds in the last four years. Up to 20% of Europe’s total increase in the number of cosmetics companies during this period is attributed to Poland.

Justice for VAT rates
Consulting company, Poland Zalewski, says the VAT announcement made by Polish Prime Minister Donald Tusk marks a step toward the Civic Coalition’s election campaign pledge.

Tusk underlined the seriousness of the problem and its effect on about 30,000 businesses, the bulk of which are small-scale operations. This industry employs close to 100,000 people, making it a substantial contributor to the labor force.

“I hope that this will bring relief and a sense of justice to a very large professional group,” said Tusk at a press conference.

The spokesperson at the Ministry of Finance adds, “If the VAT rate reduction affects the prices of the services offered, it can be expected that these services will become more available to consumers on the market.”Hairdressing services are subject to an 8% VAT rate in Poland.

KPMG believes the reduced VAT rates would apply to beauty treatment, pedicure and manicure services, including those at home and other beauty treatment services.

Setting a benchmark
The spokesperson at the Ministry of Finance highlights that Poland will follow in Ireland’s footsteps, which reduced rates for beauty services in 2021. “The scope of the reduced rate for beauty services in Poland will not exceed the preferences applied by Ireland.”

“The regulation will be introduced on the basis of EU regulations, the VAT Directive, amended from April 6, 2022, by Directive 2022/542, which gives member states some flexibility in applying VAT rates in accordance with the principle of equal treatment expressed in the preamble of Directive 2022/542.”

“The directive allows all member states to apply reduced rates to the same goods and services to which other member states apply lower rates and under the same conditions.”

The directive underscores that the goods and services eligible for reduced rates have to benefit consumers and the general interest.

By Venya Patel

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