Changes in VAT

The New Year brought a wide range of changes in tax area, including VAT. Changes in provisions regarding VAT aimed first of all at introducing solutions that would tighten up a tax system and therefore prevent tax avoidance, as well as lowering the turnover. The other goal of new provisions was to simplify and to facilitate doing business in Poland.

Given the fact that that some proposals regarding important changes in VAT are still within legislative process, we would like to kindly invite you to a Mazars training about VAT at a later date, when the works on planned changes in provisions will be at a more advanced legislative stage.

Below are presented the most important changes in VAT legislation that entered into force as at 1 January 2019:

Taxation of vouchers

The VAT Act introduces the following definitions: voucher, SPV voucher, MPV voucher, voucher emission, voucher transfer, as well as the principles of taxation for the transaction with voucher use, with taking in consideration the different nature of SPV voucher and MPV voucher and the principles of determining the taxable amount for MPV vouchers. Distinction between vouchers is important, as different methods of taxation and VAT settlement are to be applied to transactions. According to the new provisions, SPV voucher is defined as a voucher for which the place of supply of goods or services for this voucher and the amount of tax due (the value added tax or a tax of similar nature) for supply of these goods or these services are known at the moment of the voucher emission. An MPV voucher is a voucher different that an SPV voucher. An SPV voucher is already taxed at the moment of its transfer.  It is different for an MPV voucher, as a VAT becomes chargeable only after supply of goods or services in exchange for the voucher.  The new principles of VAT taxation are applicable exclusively to the vouchers issued after 31 December 2018.

The bad debt relief

The deadline to apply provisions about the “bad debt relief” for the creditor has been reduced. As of 2019 debt is considered irrecoverable within 90 days after expiry of a payment day defined in contract or in invoice. Similar changes regard the debtor’s obligation to apply these provisions. The new provisions are also applicable to claims that had aroused before 1 January 2019, and for which unrecoverability was deemed credible/probable after 31 December 2018.  

Exemption from the requirement of keeping records in cash registers

Regulation on exemptions from the obligation to keep records using cash registers came into force and will be applicable during a 3 years period (2019 - 2021). This regulation removed some exemptions, among others for maintenance services of buildings. From the other side more categories were introduced concerning the services exempted from keeping records in cash registers, provided that their activity will be fully documented by the invoices. Still exist exemption for taxpayers whose turnover from transactions made for the benefit of natural persons who are not engaged in economic activity and flat-rate farmers did not exceed PLN 20,000 in the previous fiscal year. For taxpayers who just start their economic activity, the above-mentioned limit is calculated proportionally to the time over which they are supplying goods or services for natural persons who are not engaged in economic activity and flat-rate farmers in a given fiscal year.

Exemption regarding the service of the employees’ equity plans management

VAT exemption regarding the service of the employees’ equity plans management (abbreviation in Polish: PPK) was introduced.

Refund of the tax

The requirement of the separate submission of a reasoned request (accompanying the declaration) for tax refund, as well as the request for an accelerated refund, are not applicable anymore. New provisions in this regard are applicable for settlement periods as of 1 January 2019.

VAT rates

In order to correlate VAT rates with the situation of public finances, increased VAT rates were maintained, i.e. at the level of 23% and 8% (instead of 22% and 7%), as well as a flat rate of the tax return for flat-rate farmers at the level of 7% and the flat rate for taxpayers providing services of taxi cab at the level of 4%. Above-mentioned higher levels of VAT tax will be applicable as of 1 January 2019 till the end of the year after the year in which the indicators of the situation of public finances (and thus a general condition of the economy) will meet the levels set in the VAT Act, i.e.:

  • Ratio of the public national debt net to the gross domestic product will not exceed 43% and
  • Sum of annual differences between the amount of ratio of the nominal result to the gross domestic product and the level of the medium-term budgetary objective is not lower than -6%.

Attention should be drawn especially to the following changes in VAT tax:  

New matrix for VAT rates

The draft amendment to the VAT Act provides for the change of tables from the annexes 3 and 10 which define goods and services that are subject to the tax rate 8% and 5%. In result of the above, the number of items of goods and services has significantly decreased (from 150 being in force to 71 in the annexe 3 and from 35 to 23 in the annexe 10). In the annexes 3 and 10 amended, the majority of services will be classified according to the Polish Classification of Goods and Services (PKWiU) from 2015. The other services will be described, i.e. without making reference to the concrete item of PKWiU. As concerns the goods, they will be listed based on the Combined Nomenclature (CN). 

Binding information about rates (pol: WIS)

The draft amendment to the VAT Act introduces a binding information about rates, i.e. an instrument that would make the taxpayers and tax authorities be more confident as regards the correctness of the rates applied. WIS will be a decision issued by a designated director of the chamber of tax administration for the purposes of VAT taxation of supply, import and intra-community acquisition of goods or supply of services. WIS will be available for every taxpayer having a number of tax identification NIP and for any contracting entity under provisions of the Public Procurement Law. WIS will include: a description of goods or services being its subject, a classification of this good according to CN or of this service according to PKWiU. The author of the amendment defines that no individual tax rulings will be issued within the scope of WIS. Information only about the applicable tax rate for the good sold by the taxpayer will therefore be possible only in form of submitting a request for WIS. WIS will be a binding information for tax authorities towards the taxpayer being in possession of WIS and towards a given good or service, mentioned in this WIS. According to the draft bill, also other taxpayers than the taxpayer that received WIS, can use it for the purpose of VAT taxation of transactions they had performed, under condition that the subject of these transactions will be goods / services described in WIS, as the tax authority issuing WIS is obliged to publish it on the Public Information Bulletin (after deleting the sensitive personal data). In case another taxpayer uses WIS, it will give him the same scope of protection as provided for the taxpayer who possess the individual tax ruling. The draft bill describes the procedure of WIS issuance, which include especially: necessary elements for the request for WIS issuance, amount and deadline of the fee for WIS issuance (40 PLN for each request), procedure of fee reimbursement, deadline of issue by the tax authority (without undue delay, not later than 3 months after the date of submission of the request). The taxpayer submitting his WIS request can be obliged to pay an additional fee for performing tests and analysis, if necessary. The objective of WIS is among others the protection of the taxpayer who uses it for VAT tax purposes, however WIS is not unlimited in time. WIS is expiring by operation of law in case of changes of the VAT Act, which relate directly to the goods or services that are its subject. WIS can be used to the transactions that will be performed after 1 January 2020.

Replacement of VAT declarations by JPK VAT files

The project of a new law was published, according to which i.e. declarations VAT, VAT-7 and VAT-7K will be replaced by sending a new transformed file JPK_VAT (working title: JPK_VDEK). A new file JPK_VAT will be an electronic document, its matrix will be available on electronic public services administration platform ePUAP, common for VAT declarations and VAT registers. The author of the project plans to delete annexes to traditional VAT declarations, i.e. VAT-ZZ, VAT-ZD i VAT-ZT, by replacing them with the new check boxes within the new structure of the JPK_VDEK file.

Moreover, the project of law includes regulating the mode of functioning of the Central Register of Invoices (pol: CRF), created for analysis and control of the correctness regarding VAT invoices issued by taxpayers, as well as eliminating abuses which consist of issuing phony invoices or “carousel fraud”.  

The amendment of VAT Act will introduce penalties for non-observing obligations regarding submission of declarations to tax authorities, as well as a lack of submitting them by electronical means. Penalties are also stipulated for submitting declaration in a faulty form. If the taxpayer sends a JPK_VAT with errors or including data inconsistent with the factual state, tax authorities can impose a penalty of 500 PLN, for each irregularity recorded, unless it is not corrected within 14 days since the day the request was delivered. New rules of tax returns will be applicable as of 1 July 2019.

Reverse charge mechanism and joint and severe liability

The draft bill will change a scope of application of reverse charge mechanism and a scope of sensitive goods, which supply is subject to the joint and severe liability of the recipient for the tax arrears of the supplier. The project of amendment replaces some annexes to the VAT Act, i.e., annexe 11 and 13. New tables are planned to be introduced, where goods will be classified according to the Combined Nomenclature (CN).

Transposition of PKWiU 2008 to CN or PKWiU 2015

The project of the amendment to the VAT Act introduces technical provisions, i.e. about replacement the currently in force for VAT purposes PKWiU 2008 by the appropriate symbols of CN (codes, sub-items, items or sections) or PKWiU 2015 without changing the scope of the appropriate regulations. According to the draft bill, goods will be classified exclusively based on CN.