Poland: Slim VAT 3.0 - Tax Focus

It is assumed that the draft act will enter into force on 1 January 2023, with one exception being changes to VAT sanctions, which will take effect on the day following the date of publication.

Below is a catalogue of the most important tax solutions provided for in the draft.

Changes to VAT sanctions resulting from the CJEU judgment in Case C-935/19 (Grupa Warzywna)

• The current VAT sanctions of 15%, 20% and 30% will be replaced with individualized sanction amounts up to a maximum of 30%, 20% or 15%, depending on the circumstances.
• The sanction amounts will be decided by the tax authority based on the circumstances in which a tax irregularity arose, the type and degree of a breach of a taxable person’s liability, the gravity and frequency of irregularities detected to date, the amount of the irregularities detected, and the conduct after the irregularity was detected.
• The 100% VAT sanction will be imposed only in the case of taxable persons that knowingly participate in a VAT fraud.

Increasing the sales limit for small taxable persons to EUR 2,000,000

• The annual turnover limit for small taxable person status will be increased – from EUR 1,200,000 to EUR 2,000,000 (including tax).
• In practice, a larger group of taxable persons will be eligible for the cash method and quarterly VAT settlements.

Clarifying the rules for applying the exchange rate for correction invoices in the case of the original invoice being issued in a foreign currency

• A general rule will be introduced regarding the conversion of a foreign currency for both “in plus” and “in minus” adjustments, according to which taxable persons will use the primary exchange rate for converting the amount of an adjustment to the taxable base in the adjusted invoice.
• In practice, the current rule regarding the conversion of a foreign currency in adjusted invoices will be simplified.

Clarifying the regulations on the period for demonstrating/correcting intra-Community supply of goods (WDT)

• Taxable persons will have the right to demonstrate/correct WDT in their settlements for the period in which a tax liability arose, even if the documents confirming WDT are received following the statutory 3-month period.
• In practice, the obligation to correct WDT transactions will be simplified.

Designating a single authority competent to issue binding rate information (WIS), binding excise information (WIA), binding tariff information (WIT), and binding origin information (WIP)

• The authority competent to issue WIS, WIA, WIT and WIP at first instance and to hear appeals at second instance will be the Director of the National Tax Information Office.
• In practice, the process of issuing WIS, WIA, WIT and WIP will be standardised and streamlined at national level.

Extending VAT exemption for investment fund management services to include investment funds established in other EU Member States

• VAT exemption will be extended to include management services of special investment funds (SFI), the management of which is VAT-exempt in Member States other than the Republic of Poland.
• In practice, this means that the scope of Polish VAT exemption in the part concerning SFI management services will be determined by the legislation of other Member States.

Abolishing the formal requirement to hold an invoice documenting intra-Community acquisition of goods (WNT) when deducting input VAT thereon

• Holding the invoice will no longer be a formal condition for the deduction of input VAT – input and output VAT on WNT will always be accounted for in exactly the same accounting period, with the consequence that VAT on WNT will be fully neutral for taxable persons.
• In practice, the change will eliminate the need for taxpayers to monitor whether the 3-month time limit for receiving the invoice has been exceeded.

Liberalising the conditions for faster VAT refunds for non-cash taxable persons and strengthening the procedural framework for such refunds

• The following reductions will be introduced:
  • from 12 to 6 months – the period examined when determining compliance with the condition of:
    • the achievement by taxable persons of the total value of sales, including tax, recorded using online or virtual cash registers, for each accounting period; and
    • keeping records of sales using only cash registers enabling connection and data transfer between the cash register and the Central Repository of Cash Registers (online or virtual cash registers);
  • from PLN 50,000 to PLN 40,000 – the threshold for the total value of sales, including tax, recorded using online or virtual cash registers, for each accounting period.
• In addition, for a period of two years from the entry into force of the amended legislation, taxable persons will be able to use preferential VAT refund conditions, provided that:
  • the percentage of the total value of sales, including tax, recorded with the use of cash registers (online or virtual), in a given accounting period in relation to the total value of sales, including tax, made by taxable persons in a given accounting period, was no lower than 70% (following two years, the percentage will increase to the required 80%);
  • the percentage of received payments made using payment instruments, including the use of a credit transfer service, in respect of sales including tax, recorded using cash registers (online or virtual), documented by receipts with a marking that the payment was made using a payment card, via a mobile payment service or a credit transfer service, consistent with the form of received payment, in relation to the total value of sales, including tax, recorded using such cash registers in a given accounting period, was no lower than 55% (following two years, the percentage will increase to the required 80%);
• In practice, a larger group of taxable persons will be able to use preferential VAT refund conditions.

Abandoning the requirement to agree with the head of the tax office on the proportion for input tax deduction in the case of taxable persons starting their business or with turnover in the previous tax year below PLN 30,000

• Taxable persons starting business or achieving turnover in the previous tax year below PLN 30,000 will no longer be required to agree the proportion for input tax deduction in the form of a report.
• Instead, the requirement to notify the head of the tax office of the proportion adopted by taxable persons will be introduced.
• In practice, the procedure for determining the preliminary proportion will become much less formalised.

Abolishing the requirement to agree with the head of the tax office on the forecast in the form of a report for calculating input tax in the case of taxable persons obliged to apply pre-WSS

• Taxable persons starting business in a given year will no longer be required to agree on the proportion forecast or the pre-WSS forecast in the form of a report.
• Instead, they will be obliged to notify the head of the tax office of estimated data they adopted.
• In practice, the procedure for determining the preliminary proportion will be significantly deformalised.

Increasing the amount enabling the proportion determined by taxable persons to be deemed to be 100%

• The amount of non-deductible input tax resulting from the application of the proportion, enabling the proportion determined by taxable persons to be deemed to be 100%, in a situation where the proportion exceeded 98%, will be increased from PLN 500 to PLN 10,000.
• In practice, the number of adjustments reported by taxable persons in their VAT returns will decrease.

The possibility to opt out of an annual adjustment to deducted tax if the difference between the pre-determined proportion and the final proportion does not exceed 2 percentage points

• Taxable persons will be allowed to forego making the adjustment if the difference between the preliminary proportion and the final proportion does not exceed 2 percentage points, the final proportion is lower than the preliminary proportion, and non-deductible input tax resulting from the difference between both proportions and a multi-year adjustment does not exceed PLN 10,000.
• In this case, the non-deductible input tax amount is the sum of amounts resulting from the difference between the preliminary and final proportions in a given tax year and amounts resulting from the application of a multi-year adjustment (a 5-year or 10-year adjustment).
• In practice, there will be a significant simplification of settlements for taxable persons with minor differences between the preliminary and final proportions.

The possibility to opt out of issuing an advance invoice and to issue a final invoice only

• Taxable persons will not be obliged to issue an advance invoice if they receive the full or partial payment in advance in the same accounting period in which the tax point arose, with respect to a transaction for which such payment was received.
• In practice, taxpayers’ documentation obligations will be simplified.

A new, additional possibility of factors to release themselves from joint and several liability in the event of a change in a factor

• Factors will be given a new opportunity to release themselves from liability in the event of a change in a factor by transferring VAT amounts directly to a new factor’s VAT account.
• In practice, this means that it will no longer be necessary for the supplier to be involved in the process.

No obligation to print fiscal documents issued via cash registers

• Taxable persons keeping records of sales with the use of cash registers will no longer be obliged to print documents issued using such registers, i.e.: fiscal reports and non-fiscal documents.
• This will only apply to online cash registers, including virtual ones.
• Taxable persons will thus be allowed to choose whether they decide to keep fiscal reports and other non-fiscal documents in hard copy form or in electronic format only.
• Although the introduced solution means that taxable persons will no longer be obliged to print such documents, these will continue to be issued as has been the case to date, i.e. in electronic format.
• In practice, this will make it easier and more cost-effective to comply with record-keeping obligations.

Extending the catalogue of receivables that can be paid from the VAT account

• The extension covers tax on the extraction of certain minerals, retail sales tax, sugar tax, lump tax on the value of sold production, tonnage tax and miniature alcoholic beverage levy.
• In practice, the possible risk of deterioration in taxable persons’ liquidity resulting from the limited availability of funds held in the VAT account will be mitigated.

By Wojciech Sliz, Counsel, Kochanski & Partners