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The draft act of “Slim VAT” is published

Source prawo.pl / Government Legislative Process

The Government Legislation Center presented a draft amendment to the act on tax on goods and services. It is about a package of changes named Slim VAT by the Ministry of Finance. The new rules will apply from January 2021.

Unofficial translation in English

Draft Act

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Slim VAT, i.e. another draft amendment to the VAT Act

New regulations from January 1, 2021

 

This week, a draft law amending the VAT Act was published. According to the draft, most of the provisions will enter into force on January 1, 2021. Below we present a brief summary of the most interesting elements of the amendment.

Recently, the Ministry of Finance has published information about the planned simplification of VAT settlement – i.e. the so-called Slim VAT package (short for simple, local and modern VAT). The consequence of the announcement is the draft changes published this week, which concern not only the introduction of simplifications, but also the provisions on binding rate information (WIS) and significant changes to the TAX FREE travel tax refund system .

Simplifications for taxpayers

1. Making downgrading adjustments
  • the supplier will correct the VAT due for the settlement period in which he issued the correcting invoice, provided that he has documentation confirming the arrangements with the buyer regarding the reduction of the VAT tax base;
  • as a consequence, suppliers will have to ensure that the basis for the “in minus” correction (e.g. the amounts of rebates granted) is properly documented, and if the supplier does not have such documentation, he will be able to make a VAT correction in the settlement for the period in which he obtains such documentation (regulations currently in force, which condition the right to reduce VAT due on the possession of proof of receipt of the correcting invoice by the buyer, will no longer apply);
  • in turn, the buyer will correct the input VAT for the period in which the conditions for lowering the tax base specified in the correcting invoice were agreed.
2. Exchange rate conversion rules:
  • the option of converting for VAT purposes amounts expressed in a foreign currency into PLN according to the rules applicable under the provisions on income taxes will be introduced;
  • the taxpayer will be able to choose such a solution to be used for a period of at least 12 months;
  • such an optional solution will not be applicable in cases that cannot be converted according to the provisions of the Income Tax Act – such as, for example, in the case of intra-Community acquisition or import of services for which VAT is settled by the buyer.
3. Changes regarding the split payment mechanism and the VAT account:
  • the possibility of using set-off of receivables for transactions subject to mandatory SPP (currently this option only applies to deductions referred to in Art. 498 of the Civil Code, i.e. situations in which both receivables must be due and does not include, for example, netting);
  • taxpayers will be able to make transfers from the VAT account to the customs agency in the amount corresponding to the tax on the import of goods or customs duties (the act also specifies how in this case the messages of such transfers should look like);
  • the provisions addressing the limit (PLN 15,000) for the application of the mandatory split payment mechanism will be specified;
  • an application for the release of funds from the VAT account may be submitted by entities that are not VAT payers (e.g. bailiffs), or that do not have a registered office or a permanent place of business in Poland.
The other simplifications concern, among others:
  • extending the deadline for VAT deduction without the need to correct the declaration from the next 2 settlement periods to 3 for taxpayers with monthly settlement; 
  • making incremental corrections (the currently applicable rules that distinguish the moment of making a plus correction due to the reason for this correction will be regulated in practice);
  • principles of taxation of advance payments in export (the deadline for the export of goods with export advance payments will be extended from 2 to 6 months);
  • increasing the limit from PLN 10 to PLN 20 for unchecked low-value gifts;
  • right to deduct VAT on accommodation services if acquired for resale;
  • the repeal of Art. 7 sec. 8 dealing with chain transactions (according to the justification to the draft, the repeal of this provision is of an ordering nature, as Article 22 of the VAT Act already refers to chain transactions, and the current Article 7 (8) has no equivalent in the VAT Directive; Interestingly, the CJEU judgments issued in cases concerning fuel cards were cited in the justification for this change).

WIS-related changes

The draft also includes changes to the WIS regulations and introduces regulations similar to those applicable to individual interpretations or binding tariff information (BTI). For example, it will no longer be possible to issue a WIS in the case of pending tax proceedings, control or a decision or ruling in this respect. This provision will apply to proceedings initiated and not completed before the entry into force of the new provisions.

In addition, the WIS are to be valid for 3 years from their issuance, as is the case today. WIS, which will be issued before the entry into force of the draft act (before January 1, 2021), will be valid for 3 years from the date of entry into force of these regulations (i.e. until December 31, 2023).

Changes regarding TAX FREE

Currently, taxpayers apply to the system of tax refund for travelers the provisions in force since 1999, which provide for paper circulation of documents and the use of stamps by the customs and tax office. Such regulations could cause abuse by individuals using the return and uncertainty on the part of sellers.

The legislator provides that from January 1, 2022, the travel tax refund system (the so-called TAX FREE) will be an electronic billing system. Sellers using this system will be able to issue documents at PUESC, keep records there and electronically receive confirmation of the export of goods. The requirements for tax refund entities are also to be slightly changed.

Importantly, when selling goods in the TAX FREE system, from January 1, 2022, the obligation to use online cash registers will be introduced.

Summary

The draft of changes is currently at the stage of giving opinions and its present shape will probably still change. Nevertheless, due to the wide range of proposed changes and relatively short vacatio legis, taxpayers can already prepare for the changes.

In particular, taxpayers can now verify whether the arrangements with counterparties regarding rebates and reducing adjustments are properly documented, or, for example, consider a new approach to the method of currency conversion (the current approach vs. the application of the principles resulting from income tax regulations)

 

See also SLIM VAT – simplification and modernization of VAT settlements, more flexibility in correcting invoices

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