The first half of 2020 in the Polish VAT system was marked by progressing changes aimed at sealing the VAT gap and digitization of reporting obligations.
Further modifications to the split payment mechanism, the introduction of the so-called White List or the new VAT matrix are just examples of the new solutions that taxpayers have to face. The implemented obligations cause significant number of practical challenges and doubts which must be solved immediately. Occurring problems relates not only the tax qualification of the events, but frequently lead to withholding payments or supplies, which has a key impact on the undisturbed business activity of taxpayers.
Below we present a summary of the most important issues together with suggested and recommended actions which should be taken to reduce tax risks and ensure the security of your business. Read more our download our publication in a PDF format.
Split payment mechanism and White List
As a rule, if invoice is issued by the entity which is not disclosed in so called White List register, such invoice cannot be treated as tax deductible cost. Split payment mechanism is a special cash transfer system where the amount of VAT is transferred to the special VAT account and net amount to the regular account of taxpayer.
Using split payment protects against exclusion from tax costs in the case of payment to an account outside the White List for an active VAT taxpayer (for transactions with a one-off value above PLN 15,000).
The above protection covers payments made in the period from 1 January 2020.
Split payment mechanism and joint and several liability
Split payment protects against joint and several liability with the supplier of goods or services who is an active VAT payer, in case of payment to an account outside the White List (for transactions with a one-off value above PLN 15,000).
Verification of customers on the White List, before making each transfer (for transactions with a one-off value above PLN 15,000). Split payment mechanism should be considered in the case when given entity is not in the register.
Notification of payment on account outside the White List
Notification of the tax office, in connection with the payments to a non-white list account, protects the taxpayer from the exclusion of expenses from tax costs and from joint and several liability (for transactions with a one-off value above PLN 15,000).
The notification should have been submitted within 3 days of the transfer order. Now this deadline is extended to 7 days from the date of ordering the transfer (however, during the period of the epidemic emergency and state of epidemics announced in connection with COVID-19, the deadline is 14 days from the date of ordering the transfer).
The notification must be made to the head of the tax office competent for the taxpayer responsible for making the payment and only regarding the first payment.
Already submitted notifications are still effective after the new regulations enter into force.
Verification of customers’ bank accounts, with respect to the White List, before making each transfer (for transactions with a one-off value above PLN 15,000).
In case of the absence of a bank account on the white list and payment in split payment, we suggest to create a procedure for sending the notification to the tax office.
New VAT rate matrix
Since 1st July 2020, goods are identified according to the Combined Nomenclature (CN) or PKOB, and services according to the Polish Classification of Goods and Services PKWiU (2015).
New appendixes No. 3 and No. 10 to the VAT Act are in force (containing lists of goods and services taxed at 8% and 5% rates respectively). Basically, one VAT rate was applied to the entire CN chapters, which reduced the number of items in annex no. 3 from 187 to 73, and in annex no. 10 from 35 to 24.
Identification of supplied goods according to the Combined Nomenclature or PKOB, and of supplied services according to the Polish Classification of Goods and Services PKWiU (2015).
Re-establishing the VAT rate for supplied goods and services.
The binding rate information “WIS” (BRI)
WIS (BRI) is an information issued on the request of a taxpayer where tax authorities confirm proper classification and VAT rate applicable to given category of goods or services. From 1st July 2020 The WIS will be binding for the tax authorities, it means that during the tax control tax authorities must respect the WIS obtained by the taxpayer.
Submission of an application for issuing the binding rate information (WIS) for goods sold and services supplied to protect against the consequences of applying an incorrect VAT rate.
The call-off stock warehouse type procedure
The implementation of Directive 2018/1910 has resulted in the replacement of the term “consignment warehouse” in the VAT Act by “call-off stock warehouse”.
Goods moved to the call-off stock warehouse are destined for a predetermined consignee, who can only be replaced by another taxpayer if certain conditions are met.
The time allowing the storage of goods without the need to settle Intra-Community non-transactional movement of goods is 12 months (shortened from 24 months).
If the purchaser does not collect the goods from the warehouse within 12 months, the taxpayer who introduced the goods to the warehouse will be obliged to settle Intra-Community non-transactional movement of goods.
Goods moved into the call-off stock warehouse can be used for both trading activities and for production or service provision. Movements of goods to call-off stock warehouse shall be shown in the relevant records and in the VAT-EU summary information.
The analysis of the movements of goods to and from Poland, with regard to the possibility of using the call-off stock warehouse type procedure.
Settlement of imports of goods in the VAT return
The Polish Ministry of Finance introduced simplification of VAT settlement procedure with respect to the import of goods. Active VAT taxpayer may settle the VAT in the tax return submitted for the period in which the tax obligation on the import of these goods arose. This way they avoid the need to pay VAT within 10 days in the customs clearance procedure. Simplified procedure is available upon fulfilling of several conditions, in particular confirmation of VAT registration and lack of tax arrears.
Taxpayers settling the import of goods directly in the VAT return will lose the right to submit quarterly returns, he must report on a monthly basis.
Verification of conditions for simplified procedure. Comprehensive VAT settlement under VAT compliance.
Conditions for applying 0% VAT rate for intra-Community supplies of goods (ICS)
One of the conditions for the application of the 0% VAT rate for ICS is currently not only to make the supply to a purchaser who has the correct and valid identification number for intra-Community transactions, but also to provide this number to the supplier by the purchaser.
Additionally, the 0% VAT rate for ICS will be applied only if the supplier submits correct VAT-EU summary information (this condition will be waived if the taxpayer duly explains in writing the infringement to the head of a revenue office).
Documentation of goods exports to another EU Member State
Since the beginning of 2020, Council Implementing Regulation (EU) 2018/1912 of 4 December 2018 has been in force, which introduces a rebuttable presumption regarding the evidence required to apply the 0% VAT rate for an intra-Community supply of goods. It applies where the seller will be in possession of the documents indicated in the regulation.
Non-fulfilment of the conditions introduced by the above regulation results in the supplier being obliged to prove, in according to the provisions of the Polish VAT Act, that the conditions for applying 0% rate for ICS have been fulfilled.
Comprehensive settlement of intra-Community supplies of goods, taking into account Council Implementing Regulation (EU) 2018/1912 and the Polish VAT Act.
JPK_VAT (Standard Audit File)
The obligation to submit a new JPK_VAT (consisting of recording and declaration part), will apply to active VAT taxpayer’s settlements for the period from 1st October 2020. This obligation covers large, medium, small and micro-enterprises.
As part of the VAT compliance service, preparing and sending a new JPK_VAT.