Date 1 January 2016 The legislator has introduced a number of changes to the Goods and Services Tax Act. After first the proportion of VAT deduction has been established for expenditure related to both VAT-taxed economic activity and non-VAT activities. So far, the existing legislation has not regulated this issue. The amendment concerns the determination of VAT on expenditure for both activities which cannot be fully eligible for only one of the two categories.
In the case of acquisitions of goods and services used both for the purposes of the taxable person's economic activity and for purposes other than economic activity, the amount of input tax shall be calculated in proportion, in accordance with the rules strictly laid down in the law.
The method of determining the proportion should correspond to the particularity of the activities carried out by the taxable person and its acquisition. This principle shall not apply to the use of goods and services for personal purposes.
In such a case, the free transfer of goods shall be compared with the free transfer and in the case of the use of motor vehicles for purposes other than economic activity. The determination of the proportion is intended to lead to the determination of the VAT deduction as far as possible to the specificity of the activity carried out.
The ratio of annual turnover from economic activities in the annual turnover of the taxable person from economic activities plus income or income from other activities received as appropriate shall be taken as a proportion. The percentage shall be determined on an annual basis and rounded up to the nearest integer.
The legislator also changed the powers of the head of the tax office in matters concerning VAT on imports of goods. The changes made leave the customs office in its jurisdiction the dimension and refund of the VAT on imports. The head of the tax office will no longer be competent for the reimbursement of the excess VAT on imports.
After the amendment of the rules, both the issue of the VAT dimension and the reimbursement of the excess VAT on imports will be dealt with by the principals of the customs office.
Recovery proceedings initiated and not completed before 1 January 2016 will be settled by the heads of tax offices competent for the tax on goods and services under the provisions applicable to 31 December 2015 This amendment eliminates the duality of the tax authorities involved in the tax-fixing and overpayment process and improves the procedure in this respect and is intended to speed up the recovery of any overpayment.
Since the tax on goods and services imported is assessed by the head of the customs office, it is reasonable for the same authority to determine the excess payment and distribute it in accordance with the rules laid down in Tax Ordinance.
This amendment eliminates the duality of the tax authorities involved in the tax and overpayment process and streamlines the procedure and accelerates the recovery of any overpayment.
The method of fixing VAT interest on imports of goods has also been modified. The amendment is due to the introduction into the law of customs regulations applicable in Tax Ordinance from 1 January 2016, which allow to charge increased and reduced interest on arrears. The rules for collecting increased or reduced interest will also apply to the amounts of VAT not collected as defined in the decisions of the customs authorities in the cases indicated under Article 65(6a) and 6b of the Act – Customs Law. According to the Law – Customs law the rate of interest of 150% interest rates on late tax arrears shall be charged when:
- • a customs debt is incurred on the basis of Article 202-205 and Article 210 and Article 211 the Community Customs Code,
- • the amount resulting from the customs debt has been booked on the basis of incorrect or incomplete data provided by the declarant in the customs declaration,
and as a result of the verification of the customs declaration made ex officio, the amount of the duty resulting from the customs debt exceeding 25% amount due and higher than five times the minimum remuneration within the meaning of the Law of 10 October 2002 with a minimum remuneration for the work in force on the day following the expiry of the due date. This amendment allows for increased and reduced interest rates on late payment, as well as causes interest in VAT on imports to correspond to those charged under customs law.
The powers of tax authorities in matters relating to tax on goods and services have also changed. Most provisions laying down specific rules for determining the jurisdiction of tax authorities in VAT matters have been repealed.
To determine the tax office applicable to VAT settlements from 1 January 2016 we apply the general principles resulting from Article 17 Act Tax Ordinance.
It follows from these regulations that, unless tax laws provide otherwise, the local jurisdiction of the tax authorities is determined by the place of residence or address of the taxable person.
This means that according to Article 17(1) Tax Ordinance, the tax authorities responsible for VAT have become the principals of the tax office due to the place of residence or residence of the taxable persons.
Until now, in accordance with the rules laid down in the VAT Act applicable to the taxable person, the tax authority was the head of the tax office competent for the place of performance of the activities subject to tax on goods and services.
If, therefore, the place of performance of the activities subject to tax on goods and services did not coincide with the address of the taxable person’s registered office, the taxable person accounted for in the various tax offices. The change introduced results in locality being established one tax office for all taxes.