What is changing in Polish VAT?

The main assumption of the VAT amendment is to simplify settlements of tax on goods and services made by taxpayers, as part of the so-called Slim VAT package (Simple Local and Modern VAT). Moreover, the Act introduces a few options of a clarifying and supplementary nature to some of the legal constructions. These changes also apply to the travel tax refund system, known as – TAX FREE.

The most important options within the Slim VAT package consist of:

• extension of the time limit from 2 to 6 months for exports of goods to maintain a 0% rate on taxation of advance payments for exports;

• allowing taxpayers, who have not deducted VAT in the first accounting period to make such deductions in one of the next three accounting periods. This change extends the deadline for deduction of VAT charged on a regular basis, to four accounting periods jointly. In the case of taxpayers making quarterly settlements, the solution remains unchanged, which means that they can deduct input VAT on an ongoing basis during the accounting period in which this right was acquired, or during the next two accounting periods;

• consistent exchange rates – adding an optional solution for taxpayers which could be used to determine the tax assessment basis denominated in foreign currency and converted into zlotys in accordance with the principles on income conversion, resulting from income tax regulations applicable to the said taxpayer for settlement of a given transaction (after selecting an option, the taxpayer is obliged to apply it for at least 12 consecutive months from the beginning of the month in which it was selected);

• introducing the possibility of input tax deduction, resulting from invoices documenting purchases of accommodation services for reselling;

• increasing the limit from 10 to 20 zlotys on non-recorded gifts of low value;

• no need to obtain confirmation of receipt of corrective invoices in minus, allowing a taxpayer to reduce the tax assessment basis at the point of issuing a corrective invoice, provided it follows from the documentation that the taxpayer has agreed with the buyer of the goods or the recipient of services the conditions for reducing the tax assessment basis on the supply of the goods or the provision of services, as specified in the corrective invoice and that the corrective invoice is consistent with this documentation;

• introducing a regulation to the Act on processing corrective invoices increasing the price. This option confirms the current practice according to which when the tax assessment basis is being increased an adjustment to such basis is made during settlements for the period in which the cause for increasing the tax assessment basis has occurred.

With regard to the provisions clarifying and supplementing VAT, changes concern i.e.:

• changes to the matrix of VAT rates and to the Binding Rate Information i.e.: BRI will not be issued, if the material scope of the application is the same as the subject matter of the pending proceedings or the matter has been resolved in a decision or order of a tax authority; the taxpayer is deprived of protection in a situation where the subject matter of BRI is part of a transaction considered as an abuse of law; limitation of the BRI validity period to 3 years from its issuance;

• transformation of symbols from Classification of Products and Services 2008 into symbols from Classification of Products and Services 2015, as specified in enclosure No. 15 to the VAT Act and within the scope of tax exemptions from the subjective exemption as set out in Article 113 paragraph 13 subparagraph 1 letters f) and g) of the VAT Act;

• clarifications on changes to the VAT taxpayers list (so-called white list), i.e. withdrawal from placing PESEL numbers of taxpayers crossed out from the register and of those who were denied registration, including persons being members of a body authorized to represent the entity, proxies and partners;

• clarifications on changes to the new JPK VAT, i.e. launching the Tax Ordinance Act regulations on fines for errors made in records;

• clarifications on changes to the split payment mechanism i.e. as defined in Article 105a paragraph 3 subparagraph 5, regarding invoices the gross value of which exceeds PLN 15 000, or its equivalent, provided that the amounts shown on the invoice are expressed in a foreign currency. So far, opinions have appeared that the obligation to apply the split payment mechanism only refers to invoices the gross value of which is equal to the precise amount of PLN 15 000;

• the repeal of paragraph 8 in Article 7 of the VAT Act on qualifying chain transactions, is an redundant solution, not properly grounded in the provisions of Council Directive 2006/112/EC. As it follows from the draft law justification, solutions resulting from the repealed provision may be interpreted on the basis of a general rule for taxation of the supply of goods referred to in Article 7 paragraph 1 of the VAT Act, which is also confirmed by the case-law of the CJEU.

Changes to the travel tax refund system

In order to simplify issuance, confirmation and billing procedure of TAX FREE documents, electronic circulation of documents is proposed through the Electronic Services Portal of the Customs Service (PUESC). Other changes to the procedure were triggered by making tax refund based on the TAX FREE electronic document.