Day 26 July 2021 The Ministry of Finance has published a long-awaited draft law amending the Personal Income Tax Act, the Corporate Income Tax Act and some other laws in connection with the announced tax changes concerning the so-called scheme "Polish Deal” or rebuilding the economy after the coronavirus epidemic.
On 29 October 2021 There was a new, modified bill amending - after a public consultation, an auto-amendment from the government and amendments to the Senate. The project assumes a number of revolutionary tax changes that significantly transform the tax system in Poland.
The content of the bill itself counts 277 the parties, and the reasons given to them 267 pages. In our view, it is worth reading the amendments in order to identify the opportunities and risks that are emerging. To this end, we have prepared a series of articles that will facilitate this task.
In Module No 5 We will address the most important changes made under VAT.
Additional incentive to use non-cash payments – faster VAT reimbursement
The proposed amendments further foresee the introduction of a faster VAT refund institution for so-called ‘non-cash taxpayers’. The planned provisions provide that, in compliance with the relevant conditions, the taxable person may receive an excess of the input tax during the 15 days from the time limit for submission of the declaration.
The basic requirement to be met for an accelerated VAT refund will be to prove that during the last period three months:
- at least 80% the sale has been recorded by means of a register office enabling the connection and transmission of data between the cash register and the Central Repository of Kas (CRK) – online and virtual cash registers;
- at least 80% (and to the end 2023 – not less than 65%) the sales recorded using the register offices have been paid using payment instruments, including the transfer order service.
Moreover, in order to obtain an accelerated VAT refund, additional conditions must be met:
- by previous 12 the total value recorded using the sales counters, including the tax, shall not be less than 50,000 PLN for each settlement period;
- the amount of VAT refund shall not exceed twice the tax resulting from the sales recorded using the cash registers in the relevant accounting period;
- the amount of the excess input tax due, not settled in previous settlement periods and shown in the current declaration, cannot exceed 3,000 PLN;
- taxpayer, by previous 12 for months, it will have to be registered as an active VAT taxable person, submit declarations and keep records of sales using only the register offices enabling the connection and transmission of data to the CRK;
- taxable person by 3 The months preceding the application for an accelerated VAT refund will have to have an account disclosed to the so-called ‘exempt’ "white list".
So, quick. 15-The day-to-day VAT refund will certainly give rise to a great interest by taxpayers. Unfortunately, the extended and complex conditions for receiving it can make the mechanism quite rarely used. It is also incomprehensible to exclude from the preferences the smallest entities with a turnover lower than 50,000 PLN for each settlement period.
Penalties in VAT for not ensuring that non-cash payments can be made
In view of the need for entrepreneurs to be able to accept non-cash payments using a payment instrument, the provisions of the VAT Act of the Ministry of Finance have decided to introduce measures aimed at temporarily limiting certain VAT preferences to taxable persons who, contrary to the above-mentioned obligations, will not ensure readiness to accept non-cash payments.
Consequently, the taxable person with whom it was identified that, contrary to the obligation, he did not provide for payment by means of a payment instrument at any place where the economic activity is actually carried out:
- temporary exclusion of quarterly accounts (amendments) under Article 99 VAT Act,
- temporary exclusion of the right to reimbursement of VAT within the time limit 25-day (changes under Article 87 VAT Act).
Moreover, excluding the possibility of applying for a refund of VAT at an accelerated time 25-the day-to-day reimbursement of VAT by taxable persons who were found not to have fulfilled that obligation during the period in question within the time limit 25-in such cases, it will not be eligible for both the settlement period in which it was identified and for 6 subsequent settlement periods.
The obligation to submit tax returns for the monthly periods will arise from the settlement for first month of the quarter where the irregularity was identified (if this occurred In the first or second the month of the quarter) or following the quarter in which this was identified (if so, In the third one month). A return to quarterly settlement may occur no earlier than after the expiry of the 6 the months following the last month of the quarter in which the irregularity was identified.
Introduction of VAT groups
The purpose of the solution proposed by the Ministry is to enable financial, economic and organisational entities to jointly account for VAT purposes. The solution provided for in the project is voluntary. The VAT group aims to significantly simplify settlements between its members and increase the financial efficiency of cooperation with other entities in the group.
The VAT Directive entitles Member States to introduce rules enabling VAT groups to be created in national law. The functioning of VAT groups has already introduced 18 EU countries.
Despite the existence of an analogous mechanism, i.e. Tax Capital Groups on the basis of CIT, the concept of group settlements does not exist at all in VAT. This entails a painful need for intra-group invoicing, taking into account the rules on related parties, which further impedes the operation.
Furthermore, the MF considers that the absence of VAT groups discourages taxpayers from creating PGKs in CIT. According to the data for years 2010–2016 only registered in Poland 160 PGK and Belgium VAT groups in 2016 operation 2675.
It is worth noting that according to the final version of the project, these provisions will enter into force with a half-year delay - from 1 July 2022, instead of from 1 January 2022 (compared to the previous version of the amending act published on 26 July 2021).
Introduction of VAT groups – benefits
The essential element for the functioning of VAT groups is that the provision of goods and services by entities belonging to the group is not subject to VAT (planned Article 8c(1) VAT Act). This means tax neutrality within the VAT group.
This brings mutual benefits to both the entities of the VAT group and the tax administration.
Such benefits include:
- • fewer documents to be analysed with fewer JPK VAT files containing a VAT return and records,
- • no internal invoices within the group (just issuing an accounting note),
- • beneficial effects on the liquidity of its entities,
- • for intra-group turnover, the application of the split payment mechanism will be excluded.
Importantly, it follows from the nature of the VAT group that the supply of goods and services by the entity belonging to the group in relation to the entity not belonging to it is considered to have been made by that group and vice versa.
Introduction of VAT groups – threats
In addition to the benefits previously indicated, the following consequences arising from the creation of a VAT group should also be considered: the joint and several liability of members of the VAT group, the proportion of VAT and the obligations relating to the recording of transactions between entities in the group.
The joint and several liability of the entities of the VAT group shall mean the common responsibility for its VAT obligations due for the period of operation of that group. However, it must be taken into account that this responsibility will also occur after the end of this period.
It is worth mentioning that each of the entities forming the group will have to calculate the VAT proportion on its own. This means that any entity included in it will be treated independently.
Moreover, a common proportion for the whole VAT group will also be established where it is not possible to fix the amounts of input tax charged in relation to mixed operations (which allow the right to deduct and prevent). This makes the deduction rules for the deduction of input tax for those accounting for proportions complicated and give rise to many doubts from the beginning.
It is also worth noting that the lack of taxation of transactions between entities in the VAT group does not mean that they do not need to be properly recorded. It can be concluded that existing administrative responsibilities will be replaced by new ones.
This means that work in this area will not go away, although it seems that the overall implementation of VAT groups should bring more benefits than damage, all the more so because the project's originators abandoned the need to link VAT groups with PGK.
As a result, implementation of VAT groups can be considered by a wide range of taxpayers.
VAT option for financial services
The bill introduced under Article 43 Additional VAT Act section 22-24 by which the VAT treatment of selected financial services in the B2B model was regulated. Services provided to consumers (retail customers) by financial institutions will continue to be mandatoryly exempt from VAT.
Under the provisions of the VAT Directive financial services generally benefit from VAT exemption. Member States may, on the other hand, introduce the possibility for the taxable person to choose the taxation of financial services provided by him (Article 137(1) point (a) VAT Directive). However, the tax option does not apply to insurance services.
As the Ministry of Finance points out, granting taxpayers the option of taxing financial services is intended to ensure greater VAT neutrality in the financial sector, which could provide an additional incentive to invest new investments in Poland of financial sector entities.
The VAT exemption currently applied in this respect results in the tax charged on the provision of these services being excluded in principle. The taxation of financial services will give rise to the right of deduction of input tax when purchasing those services. The choice of taxation of financial services will be binding for at least a period of time 2 years after which the VAT exemption can be re-elected.
The condition necessary to benefit from the proposed solution will be to notify the competent head of the tax office of the choice of taxation and, of course, to have the status of an active VAT taxable person.
The proposed arrangements assume that the taxable person who resigns from the exemption and who chooses to tax is obliged to tax all his services in respect of:
- transactions, including through, on currencies, banknotes and coins used as legal tender,
- management of funds,
- money lending and brokering services in the provision of these services and the management of money loans or loans by the lender or lender,
- the provision of guarantees, guarantees and any other collateral for financial and insurance transactions and intermediation services in the provision of those services, and the management of credit guarantees by the creditor or the lender,
- money deposit services, cash accounts, all types of payment transactions, remittances and transfers, debts, cheques and bills and brokering services in the provision of these services,
- services, including intermediation services, involving interests in companies or entities other than companies, where they have legal personality,
- financial instruments and brokering services.
It is therefore not possible to exempt from VAT parts of financial services and to tax VAT only some of them. If the taxpayer decides to tax, then he should consistently tax all of the above transactions in the B2B model.
Brochure discussing changes in Polish Deal, you can download for free HERE
Author: Mateusz Krawczyński
Junior tax consultant in Russell Bedford Poland. Graduated from bachelor's degree in Logistics and Master's degree in Finance and Accounting. He is currently studying law at the Łazarski University. Previous professional experience in one of the so-called Big Four companies. He specializes in tax on goods and services, in particular with regard to VAT settlements in local government units.