Company exemptions in the tax on goods and services are melting

There is no need to raise taxes directly so that taxpayers feel the fiscal burden. one such methods are to reduce the number of entity exemptions. According to the draft major amendment of the VAT Act 1 subsequent groups of taxpayers, including those selling goods under the organised distance contract system, will not be able to benefit from such a right. The Ministry of Finance motivates the proposal for a change to step up efforts to combat fraud in connection with the tax on goods and services.

Introduction

The change in the rules on specific entity exemptions in VAT is one from the most important elements of the draft amendment, which also concerns, among others, the modification of the provisions relating to the registration of taxable persons in VAT, their deletion from the register and the restoration of the registration of the entity concerned; the issue of invoices on the basis of fiscal receipts; the settlement of the tax on goods and services traded in petroleum goods; concepts first settlements in the case of supplies of buildings, structures and parts thereof; reimbursement of the tax differential in accelerated time 25 days; excise duty on lubricant preparations; additional tax obligation in the event of the taxpayer submitting a correction of the tax return following the initiation of customs and tax controls; provision of information covered by fiscal secrecy.

The impact assessment indicates that changes will indirectly affect all VAT taxable persons, i.e. ok. 1,600,000 taxpayers, in the event of a reduction of company exemptions, including tax, about 19,900 entities 2 , And when it comes to excise duty – among others. 891 active entities that hold tax warehouses.

In general, the aim of the changes is to further seal the system of tax on goods and services.

Catalogue of entity exemptions in VAT is increasingly modest

According to Article 113(1) Act on 11 March 2004 on tax on goods and services 3 Tax-free sales are made by taxable persons whose sales value did not exceed the total amount in the previous tax year 200,000 PLN; the amount of tax is not included in the sales value.

If the value of the tax-exempt sales exceeds that amount, the exemption shall cease to apply from the activity which it has been exceeded.[4].

At the same time in the VAT Act it is specified that such exemption shall not apply to taxable persons: 1) making deliveries: (a) the goods listed In Annex 12 to the VAT Act Act ((b) goods subject to excise duty, excluding electricity (PKWiU 35.11.10.0), tobacco products, passenger cars, other than new means of transport, classified by the taxable person as fixed assets subject to depreciation, (c) buildings, structures or parts thereof, in specific cases, (d) construction sites, (e) new means of transport; 2) providing services: (a) legal, (b) advisory, from a particular type of agricultural advice, (c) jewelry; 3) not established in the country[5].

According to the draft amendment, the entity exemptions will also not apply to taxable persons supplying:

• the following goods, in connection with the conclusion of a contract under an organised distance contract system, without the physical presence of the parties, with exclusive use one or more means of distance communication until and including the conclusion of the contract:

• • cosmetic and toilet preparations (PKWiU 20.42.1),
• • computers, electronic and optical products (PKWiU) 26),
• • electrical and non-electric household appliances (PKWiU) 27),
• • machinery and equipment n.e.c. 28),

• wholesale and retail parts for:

• • motor vehicles (PKWiU 45.3),
• • motorcycles (PKWiU 45.4).

In addition, the right to an individual exemption will be deprived of the tax payers providing debt collection services, including the factoring[6].

The project justification notes that the changes concern goods which are particularly prone to fraud 7 , and when it comes to parts for motor vehicles and motorcycles, the limit of 200,000 PLN their sale is not recorded. According to the Ministry of Finance, ‘the acquisition of goods without VAT and the lack of registration of such goods then promotes the provision of repair services for motor vehicles and motorcycles in the grey area’ 8 , Whereas fraud in trade in these parts also occurs in fixed trade.

In turn, the Ministry’s assessment does not justify tax preferences being used by taxpayers who provide debt collection services, where these activities do not concern the exemption provided for financial services.[9].

According to the Ministry, there is also a process – in the provision of debt collection services, including factoring – for the creation of entities operating first until the limit is reached. 200,000 PLN), then liquidate them, then establish new entrants to benefit from the exemption and not pay VAT.

invoicing based on receipts

The draft amendment also tightens the rules on the issue of invoices on the basis of fiscal receipts, so that these invoices document the purchase made by a particular taxable person.

According to the proposed amendment, when sales recorded using a register office, confirmed by a fiscal receipt, the invoice to the taxable person or value added tax will be issued only if the receipt confirming the sale contains the number by which the purchaser of the goods or services is identified for tax or value added tax purposes.

The tax authority shall impose an additional tax obligation on the taxable person who infringes this provision 100% the amount of tax shown on that invoice.

The application of this regulation is, in the opinion of the Ministry of Finance, to eliminate the phenomenon of issuing invoices for property benefit to companies on the basis of tax receipts not received by other customers – mainly in the fuel and construction industry. Generally, the bill is to enter into force 1 September 2019

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