Changes to the VAT Act in Poland (Tax & Fiscal Alert)
On 1 January 2014, new important changes to the Act on Goods and Services (hereinafter referred to as the “VAT Act”) will take effect. For many of you, the new regulations in the VAT Act mean the need to adjust accounting systems or provisions in agreements with business partners. Below, we would like to present the key imminent changes and remind you of the changes which took effect on 1 October 2013.
Changes to the VAT Act – January 2014
Changes related to the moment when the tax obligation arises
The general rule will be that the tax obligation arises the moment goods are delivered or services provided (and not at the moment when an invoice is issued within 7 days of the day on which goods were delivered/service provided)
Furthermore, the amended Act provides for the tax obligation to arise in line with specific principles:
when the whole or part of the payment is received (e.g. for provision of the financial services exempted from VAT pursuant to Article 43 clause 1 sections 37-41);
when the invoice is issued (e.g. for supply of utilities, rent/lease services — no later than on the payment date);
We would like to point out that there is no longer a specific moment when the tax obligation arises in the case of transport services.
Invoice issue dates
A consequence of the changes related to the moment when the tax obligation arises are changes related to rules for issuing invoices. Since 1 January 2014, invoices will be issued:
no later than on the 15th day from the end of the month in which the service was provided/goods were delivered and
no earlier than on the 30th day prior to delivery/provision of the service.
Also in the case of receiving an advance payment, the invoice will be, as a matter of principle, issued no later than on the 15th day following the month in which the service was provided/goods were delivered.
The tax base will no longer be the the turnover, as has been the case so far, but everything which constitutes payment which the entity supplying goods or service provider has received or is going to receive on account of the sale from the purchaser, customer or third party (including subsidies and grants received, as well as other additional payments of similar nature which directly affect the price of the goods delivered or services provided by the taxable person). The tax base will include:
taxes, customs duties, fees and other receivables of similar nature, except for the tax amount:
additional expenditure, such as commission, costs of packaging, transport and insurance collected by the entity making the delivery or service provider from the purchaser or customer.
Importantly, the tax base will not include amounts constituting the refund of confirmed expenditure incurred on behalf of and for the purchaser or customer and recognized temporarily by the taxable person in the register it keeps for the tax purposes.
When it comes to the new definition of the tax base, numerous interpretation doubts may arise — e.g. related to the term “everything”.
Changes related to “in minus” correcting invoices
As is the case now, in order to reduce the tax base in connection with issuing the “in minus” correcting invoice, taxable persons will be obliged to obtain confirmation of the correcting invoice’s receipt.
Nevertheless, the taxable person will not be obliged to have the so-called receipt confirmation, if:
obtaining the receipt is impossible despite a documented attempt to deliver the correcting invoice
the documentation held suggests that the purchaser of goods or customer knows that the transaction was conducted in accordance with the terms and conditions specified in the correcting invoice.
Comprehensive regulations for the so-called continuous service will be introduced. Services settled in settlement periods will be considered provided upon the end of each period to which settlements or payments refer. Services provided for longer than one year for which payment or settlement dates do not expire in a given year will be considered provided upon the end of each tax year.
Moment when right of deduction arises
The right to deduct input tax from output tax will arise in the settlement for the period in which the tax obligation arose in connection with the goods and services purchased or imported by the taxable person. The rule will accordingly apply also to the whole or part of the payment made prior to making the delivery or providing service.
Changes to the VAT Act – October 2013
Goods on the sale of which output VAT is settled by the purchaser
The amendment has extended the list of goods enumerated in Appendix No 11 to the VAT Act to which the “reverse charge” mechanism applies, i.e. that the VAT on the sales transaction of these goods is settled by the purchaser (not the seller). The list has been extended with, among other things, recyclable materials (made of metal, glass, paper, cardboard, plastic and rubber), paper and cardboard waste, as well as a wide range of steel products.
Joint and several liability for VAT obligations — sensitive goods
The institution of the so-called joint and several liability has been introduced, according to which in certain cases the purchaser is liable for the VAT tax which has not been paid by the supplier. The institution has been limited to the so-called sensitive goods (to which the reverse charge does not apply), enumerated in appendix No 13 to the VAT Act (i.e. among other things steel products and fuel). In principle, the institution of joint and several liability may apply, if:
the value of the sensitive goods purchased from one supplier, excluding the VAT amount, is in excess of PLN 50,000 in a given month, and
at the moment when the delivery of sensitive goods is made to the taxable person, the taxable person knew or had justified grounds to assume that the party making the delivery would not pay the tax (e.g. when the price of the goods differs significantly from the market value).
Purchaser’s liability is excluded, e.g. in the following cases:
purchase of fuel at petrol or LPG stations for standard tanks used in vehicles;
when the seller submits a relevant guarantee deposit (and is entered in a relevant register kept by the Minister of Finance).
Limitation of a possibility to use quarterly tax returns
Taxable persons who supply “sensitive goods” (with certain exceptions) have no possibility of submitting quarterly tax returns (when the net sales value of such goods exceeds PLN 50,000 or 1% of the sales value).