VAT 2021 – a summary of the changes. Correctional invoices. Chain deliveries

With the coming new year, the legislator introduced further tax changes. These included not only changes in income taxes but also the introduction of completely new, among others, "sugar tax". Also the Goods and Services Tax Act (hereinafter: VAT Act) [1] has been amended. We're looking at the modifications she made.

Act dated 27 November 2020 amending the Goods and Services Tax Act and certain other laws (Journal of Laws, item 2419, Further: Amending Act) introduces the so-called "Slim Vat" package, which was presented by the Ministry of Finance 18 August 2020 [2].

Tax payers are already used to almost annual tax changes, in particular as regards the tax on goods and services.

According to the words of the Minister of Finance Tadeusz Kosiciński, the main objective of this year's changes was to review the obligations of taxpayers "to eliminate or reduce those which constitute a barrier to the development of Polish entrepreneurship" [3].

Some of the modifications will actually meet this goal, and others – only seemingly.

Harmonisation of rules on the application of foreign exchange rates

first of the elements of this amendment is the codification of the rules on the application of foreign exchange rates.

So far, taxpayers have been required to apply the rules for converting into gold amounts denominated in foreign currency to determine the tax base on the basis of Article 31a VAT Act, which was essentially different from the method of conversion expressed in the income tax legislation.

The difference occurred in particular when the taxable person issued the invoice before the tax obligation arose, resulting in the same amount in foreign currency being converted on the basis of two different exchange rates.

From 1 January 2021 added Article 31a(2a-2d) to the VAT Act, enabling the taxable person to apply for the purposes of the tax on goods and services of conversion rates applicable under the income tax rules. However, the choice of such a method should be used for at least subsequent 12 months.

In the event that such a method is abandoned, the basic provisions laid down should also apply Under section 1 and 2 the article in question for a subsequent period 12 months. This is to prevent taxpayers from adjusting exchange rates for optimisation purposes [4].

Facilitation of rates 0% for pre-payment export goods

Facilitation of the application of the rate was also introduced for exporters 0% to pre-paid export goods. We are talking about an extension of the two-month period to six months [5], from the end of the month in which the taxable person received payment of the advance or the total payment relating to the export of the goods and a document confirming the export of the goods outside the European Union. Only the fulfilment of both conditions allows the application 0% rates.

Other VAT rebates

Another tangiblely positive change for taxpayers is expected to be financial benefits. The project includes several minor changes:

Extension of the period of exercise of the right to deduct under the current VAT return. Under general rules, a taxable person may exercise the right to deduct in the current settlement period not only during the settlement period the right to deduct, but also in subsequent settlement periods.

From 1 January 2021 This period is extended from two to three months following the month in which the right to deduct is established. In the case of taxable persons accounting on a quarterly basis, the legal status has not changed. [6];

Allowing VAT deduction when purchasing accommodation services for resale [7], which brings the law into line with the European interpretation following the judgment of the Court of Justice of the European Union of 2 May 2019 on C-225/18 Lotos Group and the Supreme Administrative Court judgment 11 September 2019 reference no. I FSK 2084/15.

Increase in the limit of gifts of low value not subject to taxation for the free supply of goods in the case of products not included in the gift records. After the amendment, the cap on the unit purchase price of the goods or their unit cost of production increases from 10 PLN to 20 PLN net [8].

„Simplifications’ for corrective invoices

By far the most significant changes for taxpayers are those in the area of amending invoices. They focus mainly on the amendment of the provisions on the in- minus amending invoices in question under Article 29a(13) and 14 VAT laws, i.e. invoices reducing the tax base for:

• after selling a discount or discount,
• with return of goods or packages,
• with repayment to the buyer of all or part of the payment received before the sale, if not made,
• with an invoice error showing a tax amount higher than due.

In force to the end 2020 the condition of reduction of the tax base was to obtain confirmation of receipt of the corrective invoice by the purchaser. If such confirmation was received after the date of submission of the tax return for the tax period in question, the taxpayer was still able to recognise this adjustment during the accounting period of receipt of the confirmation. The purchasers reduced the value of the input tax in principle for the period during which the adjustment invoice was received.

The main objective of the proposed amendments was to waive the burdensome obligation to wait for the purchaser to confirm receipt of the corrective invoices. The new wording of the rules makes it possible to be independent of the possible delay of counterparties in sending confirmations or delays in delivering them, resulting in the deduction of the adjustment to subsequent settlement periods.

New Article 29a(13) is stated as follows: ‘The reduction of the taxable amount, in relation to the basis laid down in the invoice issued with the tax shown, shall be made for the reference period during which the taxable person has issued the corrective invoice, provided that it is apparent from the documentation held by that taxable person that he has agreed with the purchaser of the goods or services to reduce the taxable amount for the supply of the goods or services specified in the corrective invoice and those conditions have been fulfilled and that the invoice is in accordance with the documentation at his disposal. Where, during the accounting period during which the corrective invoice was issued, the taxable person does not have the documentation referred to in the sentence first, the reduction of the tax base shall be made for the settlement period during which the documentation was obtained.’ However, this gives rise to some doubts for taxpayers.

The provision does not define what documentation will be needed to consider that it has agreed with the counterparty the conditions for lowering the tax base.

Is a contract containing cases where discounts or indulgences are granted adequate to certify future corrective invoices, or should a customer be contacted and e-mail kept as documentation for each corrective invoice?

VAT specialists indicate that the possibility of recognising the relevant contractual provisions as a basis for the issue of the corrective invoice will be admissible documentation but the provisions do not define this issue explicitly. It is therefore necessary to await interpretations of the tax authorities.

In the explanatory memorandum to the Amending Act, we find the following examples of such documentation: "... commercial documents, including annexes to contracts, commercial correspondence, proof of payment, compensations, etc., which confirm that both parties know and accept the new revised terms of the transaction".

It should also be stressed that similar provisions on the inclusion of an in-min correction invoice by purchasers have changed.

According to the revised Article 86(19a) VAT Act, the purchaser reduces the amount of the input tax charged in the settlement for the period during which the conditions for such adjustment were agreed with the supplier. This means that this obligation has been separated from the invoice itself.

Not the moment of receipt of the invoice, and the moment of agreement on the conditions for lowering the tax base determines the obligation to correct the input tax.

In addition, the explanatory memorandum to the Amending Act indicates that, where the taxpayer is unable to obtain the relevant documentation, a correction of the value of the tax may be accepted solely on the basis of an invoice, provided that the receipt is confirmed.

Thus, collecting confirmations will no longer be a required obligation for in minus invoices, but this does not mean that in some cases taxpayers will completely waive them. They should consider for themselves the documentation to be collected, taking into account the specificity and extent of their activities.

It is from these documents that it should be entitled to correction with its date. An earlier solution, i.e. clearing on the basis of the corrective invoice itself and confirming its receipt, should be the last resort.

The amendment to the in plus amending invoices was rather of a confirmatory nature of the administrative court line used so far. The provisions did not specify the time when such a correction of the tax base was taken into account. From 1 January 2021 added Article 29a(17) VAT Act, confirming the practice of recognising the adjustment in the settlement period during which the reason for the correction arose.

The new provisions on amending invoices shall in principle apply to those issued after 1 January 2021 However, the Amending Act provides for the possibility of applying the provisions in force to 31 December 2020 for an additional year i.e. until 31 December 2021 [9].

However, in order to do so, both the seller and the buyer must agree on such a choice in writing before the exhibition. first correction invoice this year.

Resignation of such choice may take place no earlier than after the expiry of the 3 months from the end of the month in which that choice was made and must also be agreed in writing [10].

Chain deliveries hampered

The Amending Act repealed Article 7(8) VAT laws specifying chain deliveries of goods. This provision provided a clear basis for the treatment of each chain sale to taxable persons involved in chain transactions: ‘where several operators supply the same commodity in such a way that first of which they shall issue the goods directly to the last buyer, it shall be considered that the supply of the goods has been carried out by each of the operators involved in those operations.”

The removal of this article may create difficulties for taxpayers to determine the tax consequences for such transactions, particularly for domestic transactions on fuel cards, for example. According to the legislator, this provision was an overregulation and, as such, did not have a proper basis in EU legislation.

The justification indicates that the chain transactions relate to Article 22 VAT laws, however, are only applicable to chain transactions starting in Poland but ending in another Member State or outside the European Union.

This gives rise to a number of doubts when determining the tax implications of removing this standard. Therefore, this implies a risk of contesting the right to deduct VAT for intermediaries or the risk of empty sales invoices. It is also unclear how the tax authorities will address this issue.

Will there be an extension of the rules in the course of interpretation and judgments Article 22 also for domestic transactions or other practices will be developed.

Notwithstanding the decision of the authorities, taxable persons should examine their own commodity transactions in order to confirm whether they actually acquire goods which are the subject of a given transaction under a commodity and service tax.

Damian Kuszewski

The author is a graduate of the Warsaw School of Economics in Finance and Accounting, and is currently a law student at SWPS. From 2018 Associated with Russel Bedford Poland. His professional interests are tax law and, in particular, income taxes.