SLIM VAT – Changes, changes, changes…

Sept. 3, 2020 Poland

The Ministry of Finance is intensively working on changes concerning VAT taxation. Despite numerous changes that entered into force from 1 January 2020 (Quick fixes, VAT rates matrix, changes concerning the so-called White List of VAT taxpayers)and changes that will enter into force from 1 October 2020 (so-called VDEK, complete change in the field of simplifications in the import of goods) the Ministry of Finance is planning further changes in VAT.

The published draft amendment act in the scope of VAT (draft dated on 14 August 2020) includes the recently announced simplifications for taxpayers so-called SLIM VAT, but also completely new proposals such as changes in Tax-Free regulations, changes in Binding Rate Information (WIS), clarifications on provisions regarding split payment mechanism and others.

SLIM VAT

SLIM VAT (Simple Local and Modern VAT) is a package of changes postulated by the Ministry of Finance to make VAT easy to apply. The proposed changes include among others simple invoicing (invoice corrections in minus and invoice corrections in plus), facilitations for exporters, extending the deadline for the input VAT deduction, and increasing the limit on the low-value gifts.

The changes are proposed based on the entrepreneurs’ demands during the meetings with the government.

To read more about SLIM VAT we encourage you to see our article.

Additionally, the government focuses on the following areas:

→ TAX-FREE

  • Ensuring the electronic circulation of Tax-Free documents and the obligation to record the issued Tax-Free documents in the IT system (including electronic confirmation of exports outside the EU and documents issued by sellers participating in the Tax-Free system) and the amounts of tax refunded to travelers.
  • The electronic circulation of documents will be recorded in the Platform for Electronic Tax and Customs Services (PUESC).
  • The basis for the tax refund will be an electronic confirmation of the export of goods outside the UE, issued by the customs officer.
  • In the proposed electronic Tax-Free system the Tax-Free documents in paper form (which is provided by the current regulations) confirmed by customs authority will be used on a limited basis in the case of export of goods by travelers from outside the EU through an EU Member State other than Poland.
  • The obligation for the seller to keep records of the Tax-Free documents in electronic form using the electronic Tax-Free system.

BINDING VAT RATE INFORMATION (WIS)

  • Possibility to apply for WIS for goods classified according to Polish Classification of Goods and Services (PKWiU), e.g. for goods covered by the split payment mechanism (not provided for in the current regulations).
  • Introduction of an obligation for the applicant applying for the WIS to submit a declaration – due to criminal liability for submitting false statements – as at the date of submission of the application in the scope covered by the application, no tax proceedings, tax or customs, and fiscal control is pending and that the case has not been resolved in substance in a decision/ruling of the tax authority. In other words, WIS will not be issued at all, if tax proceeding will be pending in the case that the taxpayer applies for or the case has been resolved in a decision/ruling of the tax authority.
  • Introduction of the regulation according to which WIS will be in force for a period of 3 years from the date of its issue. After 3 years the taxpayer will be entitled to apply for further WIS in the same scope. The proposed transitional provisions in this scope stipulate that the WIS issued before the date of entry into force of new provisions as well as decisions concerning to amend the WIS will remain into force for the period of 3 years from the date of entry into force of the act.

SPLIT PAYMENT

  • The Ministry of Finance clarifies that the split payment mechanism applies to invoices where the value exceeds PLN 15.000 gross or the equivalent of this amount. The proposed change results from unclear wording of the provision and the opinion of some experts, according to whom the interpretation of the current provision indicates that the split payment applies only to invoices worth exactly PLN 15.000 gross.
  • Exclusion of the obligation to use the split payment mechanism in the case of deductions referring to civil code, e.g. netting.
  • Introducing a provision enabling the submission of an application for the release of funds not only by the active VAT taxpayer but also by other entities that are not VAT taxpayers, who have funds on the VAT accounts, for example, by bailiffs from performing the enforcement and security activities, entities without a headquarter or a fixed establishment in Poland.
  • The possibility of making payments from the VAT account of the amount corresponding to the VAT amount due to the import of goods or customs duties for customs agencies.

Further, the amendments include changes in the procedural and clarifying nature, in particular:

  • The repeal of article 7 (8) of the VAT Act in the scope of chain transactions as a redundant solution, having no basis in the regulations of Directive 2006/112/EC.
  • Clarifying changes in the scope of White List regulations consisting of resignation from including personal identification (PESEL) numbers in the list.
  • Change of PKWiU (Polish Classification of Goods and Services) 2008 symbols to symbols of PKWiU 2015 in the attachment no. 15 to the VAT Act and in the scope of exemptions form subjective exemption from article 113 (13) point 1 (f and g) of the VAT Act.

The experts’ opinions regarding the proposed changes are divided. Many of them argue that changes do not meet business expectations and they are not the most important changes from the taxpayers’ point of view. For example, the provisions about 3 months deadline for the neutral VAT reporting for the transactions settled by the reverse charge mechanism, for some group of experts, are more important regulations to change. In addition, the Ministry of Finance plans to present further tax changes under the so-called SLIM VAT package every six months which rise a question of whether the changes could not be present collectively in the one draft amendment of the act? Certainly, the taxpayers will not complain about the lack of changes in VAT in the coming years.

The draft amendment of the VAT Act is currently at the stage of consultations. We will inform you about the further stages of the draft.

In the case of any questions, please contact our tax experts:

Anna Szafraniec
CEE VAT Compliance Director
E: aszafraniec@asbgroup.eu

Łukasz Woźniak
VAT Compliance Manager
E: lwozniak@asbgroup.eu

Paulina Malendowicz
Tax Consultant
E: pmalendowicz@asbgroup.eu