Polish Parliament passed new amendment of the VAT Act introducing set of new regulations which are to simplify and make the process of VAT compliance friendlier to the taxpayers. Core of the amendment is so called Slim VAT package (Simple Local and Modern VAT) and updating of TAX FREE refund procedure.
SLIM VAT is a simplification package intended to be a response to the reported expectations of entrepreneurs. The most important changes included in the SLIM VAT act are:
- Changing the rules for recognizing “in minus” correction invoices
- Defining the rules for recognizing corrective invoices “in plus”
- Extension of the deadline for VAT deduction “on an ongoing basis” for taxpayers settling VAT on a monthly basis
- Simplification of the rules for converting the tax base expressed in a foreign currency into PLN
- Extension of the deadline for the movement of goods with advance payments for the export of goods
- An increase in the limit for gifts of small value
- The possibility of deducting VAT on accommodation services purchased for resale.
The vast majority of the introduced changes is binding from January 1st, 2021 (changes in the scope of TAX FREE are to enter into force on January 1, 2022).
In minus correction recognition (credit note)
The introduced solution will allow the seller to reduce the tax base already at the time of issuing the correcting invoice (credit note), provided that the documentation he possesses shows that he has agreed with the buyer the conditions for reducing the tax base for the sale specified in the correcting invoice. If the taxpayer does not have documentation in the period in which he issued a correcting invoice, he will reduce the tax base for the accounting period in which he obtains this documentation.
The amendment assumes that when issuing a correcting invoice, actual arrangements between contractors will be important, and not the issuing of the document.
In February, the taxpayer will issue an invoice for the sale of goods. In March, he will agree with the contractor a discount on the sale, which will be confirmed by the documentation. In April, he will issue a correction invoice (in minus), which will be delivered to the contractor in May.
In these circumstances, the seller should include the correcting invoice in the settlement for April.
The buyer, if his contractor issues a correction invoice “in minus”, will be obliged to reduce the amount of input tax in the settlement for the period in which the conditions for reducing the tax base for the sale specified in the correcting invoice have been agreed.
This means that it is not the moment of receipt of the invoice, but the moment of agreeing on the conditions of lowering the tax base, that determines the obligation to correct the VAT charged by the buyer.
The taxpayer will purchase the goods in February. In March, they will agree a discount on the purchase made with the contractor, which will be confirmed by the documentation they have. In March, the seller will issue a credit note, which will be delivered to the buyer in April. The buyer will include the correcting invoice in the March settlement.
Doubts may arise as to the method of determining the moment of agreeing the terms of lowering the tax base. The legislator did not specify what exactly should be understood by this, and this unfortunately may lead to disputes between taxpayers and tax authorities.
It is worth adding that the justification to the draft act stipulates that if the taxpayer does not have documents other than the correcting invoice itself, the issued correcting invoice will also be a document from which the new terms of the transaction will arise (if it is possible to confirm that the invoice has been delivered to the buyer).
The legislator also indicated that in the case of corrective invoices issued before 1 January 2021, the provisions of the VAT Act in the old wording will apply.
In the case of corrective invoices issued after December 31, 2020 in connection with a reduction in the tax base or in connection with the finding of a mistake in the invoice, taxpayers in the period until December 31, 2021 may apply the provisions of the VAT Act, in the old wording, if these provisions will be agreed in writing between the supplier of the goods or services and the buyer, prior to the issuance of the first corrective invoice in 2021.
However, the resignation from the choice referred to above may not take place earlier than 3 months from the end of the month in which the choice was made, provided that it is agreed in writing between the supplier of goods or services and their buyer. The provisions of the VAT Act in the new wording will apply to corrective invoices issued after the date of resignation.
In plus correction recognition (debit notes)
The act provides for the rules of recognizing corrective invoices increasing the tax base. Until now, the method of making such corrections resulted only from the issued individual interpretations and case law.
The moment of recognizing the correction invoice “in plus” will depend on the reason for its issue:
- If the correction is caused by reasons arising already at the time of issuing the original invoice, it should be settled in the tax declaration for the period in which the original invoice was reported
- In a situation where the correction is caused by reasons occurring after the sale, the correction should be made in the tax declaration for the month in which the correcting invoice was issued (in the original invoice, the tax due was reported in the correct amount, while the reason for the correction arose later)
- Detection of an error in the original invoice will result in the need to increase the tax base in the tax return for the period in which the original invoice was shown.
Extension of the deadline for VAT deduction “on an ongoing basis”
The introduced change will allow taxpayers who pay monthly taxes and did not deduct VAT in the first possible tax period, to make this deduction in one of the next three tax periods, and for the taxpayer who settles quarterly for one of the next two tax periods.
This means that the assumed change will extend effectively the time for taxpayers settling monthly payments to a total of 4 months. In relation to taxpayers who pay quarterly, the solution will remain unchanged.
In March, a taxpayer who settles monthly payments will receive an invoice documenting the purchase of goods (giving the right to deduct VAT on the date of issue).
The taxpayer will have the right to deduct VAT from the invoice received in the settlement of March, April, May or June.
In March, the taxpayer settling quarterly will receive an invoice documenting the purchase of the goods (giving the right to deduct VAT on the date of issue).
The taxpayer will be entitled to deduct VAT from the invoice received in the settlement of the 1st, 2nd or 3rd quarter.
Possibility to choose the rules for converting the tax base expressed in a foreign currency into PLN
To determine the tax base expressed in a foreign currency, taxpayers will be able to convert into PLN in accordance with the principles of converting income resulting from the provisions on income tax (applicable to this taxpayer for the purposes of accounting for a given transaction).
It should be underlined that taxpayers will have the right, and not the obligation, to convert the tax base expressed in a foreign currency into PLN according to the new rules. They will also be able to continue to apply the rules set out in the Value Added Tax Act.
A VAT taxpayer providing a construction service for another taxpayer will be able to use two different exchange rates (for VAT from the day before the invoice is issued, for PIT / CIT from the day before the service is provided) or will be able to set one common exchange rate for the settlement of transactions in VAT and PIT / CIT (dated before the service is performed).
After choosing the newly provided option, taxpayers will be obliged to apply it for at least 12 consecutive months from the beginning of the month in which they chose it. If, during the period of use the new conversion method, the taxpayer will make a transaction that is not subject to conversion in accordance with the rules applied in income tax (eg intra-income tax), he will be obliged to apply the VAT conversion methods for this transaction.
Extension of the deadline for movement of goods with advance payments for the export
The amendment to the act assumes that the receipt of the advance payment (in whole or in part) before the delivery of goods will be taxed at the rate of 0% provided for the export of goods, if the goods are moved within 6 months (instead of 2 months), counting from the end of the month in which the taxpayer received advance payment, and within this period, he will receive a document confirming the export of the goods outside the territory of the European Union.
In June, the taxpayer will receive an advance payment for the export of goods, which is taxed at a 0% rate. The goods will be moved from the territory of the EU in December of the same year (the taxpayer will receive a document confirming the export).
The taxpayer will not lose the right to tax the advance payment received for the export of goods at a rate of 0%.
Increase in the limit for gifts of small value
The adopted solution provides for the increase of the limit for gifts of small value not checked in from PLN 10 to PLN 20. It is related to changes in the prices of promotional items.
The taxpayer will provide contractors with flash drives with their company’s logo free of charge as part of a marketing campaign. The value of each pendrive will be PLN 19.
The taxpayer will not be obliged to charge VAT for the transfer of flash drives, even if he does not keep records of the recipients.
Possibility to deduct VAT on accommodation services purchased for resale
The introduced change will make it possible to deduct VAT on accommodation services purchased by taxpayers, but only for resale, i.e. to transfer it to another buyer (in connection with the so-called re-invoicing of the service).
Other purchases of accommodation services, i.e. if the taxpayer purchases it for the purposes of his business, is still not deductible. The introduced solution will also not apply to accommodation services charged obligatorily in the VAT-margin system, including the purchase and resale of tourist packages.
The taxpayer purchased the accommodation service. Due to the fact that this service will be used by his contractor, the taxpayer re-invoiced the purchased service to the contractor.
The taxpayer will have the right to deduct VAT from the invoice documenting the purchase of the accommodation service.
Other amendments introduced:
- The possibility of obtaining binding rate information (WIS) for goods identified according to PKWiU (Polish Classification of Goods and Services), and not only according to the CN;
- Exclusion of the possibility of issuing WIS in cases resolved in a decision or ruling;
- The period of validity of the WIS, which will be 5 years from the date of issue;
- Introducing the possibility of making payments from the VAT account of the amount corresponding to the amount of tax on the import of goods and customs duties for customs agencies;
- Enabling the submission of an application for the release of funds from the VAT account by entities that are not VAT payers (eg entities that do not have a registered office or a permanent place of business in Poland);
- Changes in the scope of TAX FREE (aimed at introducing the electronic document flow TAX FREE and electronic confirmation of the export of goods);
- Obligation to use online cash registers for merchants delivering goods in the travel tax refund system (TAX FREE).