Most important changes in taxes in 2020
Sealing of tax system continues – 10 most important changes in taxes in 2020.
- OBLIGATORY SPLIT PAYMENT AND TAX DEDUCTIBLE COSTS
1 November 2019 was the date on which the obligatory split payment mechanism came into force in respect of transactions involving the goods or services mentioned in Annex No 15 to the VAT Act (vulnerable goods and services, such as: construction services, fuels, scrap, steel, steel products, electrical machines and devices along with their parts and accessories), when the gross amount on the invoice exceeds PLN 15,000, and the transaction is conducted by VAT payers (B2B).
Split payment was introduced in July 2018, but its application was voluntary at that time. However, from 1 November 2019, split payment is obligatory in cases specified in the Act, whereas in other situations the buyer can decide whether they wish to pay the invoice with our without the split payment mechanism.
In their invoices, sellers must include information about the obligatory application of the split payment mechanism, and collect payments in the same form. Nonetheless, it is important for the buyers to verify the obligation to make a split payment, as both the seller and the buyer are liable to sanctions for failing to meet the new requirements regarding the obligatory split payment, i.e. they may incur an additional tax liability of 30% of the amount of the VAT stated on the invoice, as well as sanctions prescribed in the Fiscal Penal Code.
What is more, as of 1 January 2020, paying an invoice without the split payment mechanism – contrary to the obligation to do so – results in the lack of possibility to classify an expense as income tax deductible (an obligation to exclude the expense from tax-deductible costs in the month of the payment).
- WHITE LIST OF VAT TAXPAYERS AND TAX-DEDUCTIBLE COSTS
1 September 2019 is the date of entry into force of the so-called “white list” of VAT payers (an electronic list of: entities registered as VAT payers, entities denied registration as VAT payers, entities deleted from or reinstated in the register of VAT payers).
In addition, according to new regulations effective from 1 January 2020, if an entrepreneur makes a payment to a supplier of goods or services, in connection with a transaction worth more than PLN 15,000, to a bank account other than the one on the said list, such an expense cannot be classified as a tax-deductible cost. In addition, the entrepreneur will bear joint and several liability together with their contractor in respect of VAT arrears. However, it will be possible to avoid negative consequences, if within 3 days of the date of the transfer order the entrepreneur notifies the head of the tax office competent for the issuer of the invoice about making a transfer to a bank account that is not on the list.
It should be emphasised that a division of payment into several transfers, so that the amount of the transfer is less than PLN 15,000, may be treated as illegal evasion of the obligation to make the payment to the bank account on the “white list.”
- WITHHOLDING TAX – POSTPONED AGAIN
On 23 December 2019, the Minister of Finance issued another regulation postponing, until 1 July 2020, the entry into force of the obligation to deduct withholding tax at the national rate (19% and 20%, as applicable) on payments subject to such tax, made to one contractor, in the total amount in excess of PLN 2 million in a tax year.
From 1 July 2020, remitters making payments subject to withholding tax can use two solutions provided for in the applicable provisions, which will allow them to avoid the collection of withholding tax on payments after exceeding the limit of PLN 2 million:
- a statement submitted electronically by the management board no later than on the day of payment (penal and fiscal liability for making a false declaration),
- obtaining an opinion on exemption from withholding tax (possible only for dividends, interest and royalties paid to associated entities and entities using exemption from withholding tax under EU directives) – a request for such an opinion may be made even now.
What is important, a postponement of the obligation to deduct withholding tax on amounts exceeding PLN 2 million does not affect the remitters’ obligation to exercise due diligence when verifying the right to use preferences in terms of withholding tax and to check the contractor’s status as the beneficial owner of the amounts subject to withholding tax, in order to apply a lower tax rate or exemptions.
- BAD DEBT RELIEF IN INCOME TAXES
1 January 2020 is the effective date of regulations concerning the so-called bad debt relief in income taxes. Under these regulations, creditors are entitled to reduce the tax basis by the amount of debt which has not been paid or disposed of in any form within 90 days of the payment due date stated in a contract or an invoice (bill). However, it is a condition that no more than 2 years may elapse from the date of issue of the invoice (bill) or the date of conclusion of the contract documenting the debt, counting from the end of the calendar year in which the invoice (bill) was issued or the contract was made. If the calendar year in which the invoice (bill) was issued is different from the calendar year in which the contract was concluded, the two-year period is counted from the end of the calendar year of the later of such events. At the same time, the creditors’ entitlement is correlated with the debtors’ obligation to increase the tax basis by the amount of unpaid claim. It should be remembered that the debtors will have this obligation whether or not the creditors exercise their right to reduce the tax basis.
The above regulations apply only to receivables and liabilities resulting from commercial transactions in connection with which at least one party determines its revenues or tax-deductible costs (regardless of the date of their recognition as revenues or expenses). What is more, income of the debtor and of the creditor must be subject to income tax in Poland.
According to transitional rules, new regulations apply to commercial transactions with due dates after 31 December 2019. Therefore, the first cases of application of the bad debt relief will take place already by the end of March 2020.
- QUICK FIXES PACKAGE
By 31 December 2019, Poland was obliged to introduce the quick fixes package in the scope of VAT, governed by the provisions of Council Directive (EU) 2018/1910 of 4 December 2018 as regards the harmonisation and simplification of certain rules in the value added tax system for the taxation of trade between Member States.
Due to the fact that legislative work in the scope of implementation of the directive has not been completed, the Ministry of Finance has issued a communication informing about the possibility for the taxpayers to use, in the transitional period (i.e. from 1 January to the date of entry into force of the national provisions implementing the directive), either the provisions of Directive 2018/1910 directly, or the previously applicable provisions of the VAT Act. At the same time, the Ministry of Finance points out that whether the taxpayers decide to use the provisions of Directive 2018/1019 or the national Act, they should do it consistently in all aspects related to the settlement of VAT in particular transactions.
It should be borne in mind that Directive 2018/1910 introduces new regulations in the scope of:
- alignment of principles for the transfer of own goods to warehouses in other countries (procedure for call-off stock warehouses),
- changes concerning the taxation of supplies of goods done as part of chain transactions within the European Union,
- changes concerning the conditions necessary for the application of 0% VAT rate in intra-Community supplies of goods.
In turn, from 1 January 2020, the provisions of Regulation 2018/1912 apply directly, introducing rules in the scope of:
- evidence required for the application of exemption with the right of deduction (0% rate) in respect of intra-Community supplies of goods,
- detailed information on the records maintained by taxpayers participating in the call-off stock procedure.
- NEW MATRIX OF VAT RATES
On 1 November 2019, regulations on the new matrix of VAT rates became effective. The new matrix of VAT rates will be used as of 1 April 2020 (with the exception of book and press publications). The regulations introducing the new matrix of VAT rates include:
- amendment of classification of goods and services for VAT purposes by way of resignation from the use of the Polish Classification of Goods and Services (PKWiU 2008) in favour of the Combined Nomenclature (CN) or the Polish Classification of Types of Constructions (PKOB) in respect of goods, and the Polish Classification of Goods and Services (PKWiU 2015) in the scope of services,
- simplification of the system of VAT rates by applying a single rate to entire groups of goods (sections of CN) to the largest possible extent,
- introduction of the Binding Rate Information (BRI) provided by the Head of the National Revenue Administration Information Centre at the taxpayer’s request.
It has been possible to request BRI from 1 November 2019, but the protection under BRI will be valid as of 1 April 2020. It is important to mention that BRI may also be used for the purposes of application of the VAT Act regulation and the relevant implementing provisions other than those relating to the determination of the appropriate tax rate (e.g. in the scope of exemption from the obligation to use cash registers).
- REPLACEMENT OF VAT RETURNS WITH NEW JPK STRUCTURE
VAT-7 and VAT-7K tax returns will be replaced with JPK_VAT7M file (for taxpayers with monthly settlements) and JPK_VAT7K file (for taxpayers with quarterly settlements).
From 1 April 2020, the obligation to submit the new JPK file will apply to large entrepreneurs (entities with more than 250 employees in at least one of the last two financial years, and with their annual net turnover on the sale of goods, products and services and financial operations in excess of the equivalent of EUR 50 million). As of 1 July 2020, this obligation will be applied to other VAT payers.
The new JPK_VAT structure is to include both the VAT return and the VAT records, i.e. information on purchase and sale, in accordance with the VAT records for the particular period, items from the current VAT-7 (VAT-7K) return, and additional details required for an analysis of correctness of the settlement. It is necessary to state that the VAT records in the new JPK structure will require the assignment of special marking (codes) to selected types of transactions (e.g. the supply of particular types of goods and the provision of certain services, transactions with associated entities, transactions subject to the obligatory split payment mechanism).
- COOPERATION AGREEMENT WITH THE HEAD OF KAS
Pursuant to the provisions of the Tax Ordinance, from 1 July 2020 taxpayers whose revenues exceeded EUR 50 million in the previous tax year may request an Agreement on cooperation in tax matters to be made with the Head of the National Revenue Administration (KAS).
The cooperation agreement is aimed at ensuring that the taxpayer complies with the tax law under conditions of transparency of actions and mutual trust between the tax authority and the taxpayer. In the agreement, the entrepreneur will be able to arrange with the Head of KAS certain important issues concerning their tax settlements, such as the interpretation of tax law provisions, transfer pricing, lack of relevance of the application of the provisions of the general clause against tax evasion. A customs and fiscal audit of the taxpayer who is party to the cooperation agreement may only be conducted by the Head of KAS.
The entrepreneur concluding the cooperation agreement must meet certain additional conditions, such as the introduction of an internal tax supervision system in the company; also, the agreement will be preceded by an audit carried out by the Head of KAS.
- ISSUANCE OF INVOICES ON THE BASIS OF RECEIPTS
From 1 January 2020, new rules apply in respect of the issuance of invoices based on cash register receipts. In the case of a sale recorded on the cash register, an invoice based on the receipt can be issued only when the tax identification number (NIP) of the buyer is placed on the receipt confirming the sale. The new regulations do not apply to transactions between entrepreneurs and private individuals, which are still subject to the provisions in their current wording.
A violation of the provisions may lead to a sanction, i.e. an additional tax liability of 100% of the VAT amount stated on the invoice. Importantly, the additional liability will be imposed both on the taxpayer who issues the invoice for the sale documented with the receipt in breach of the regulations, and on the buyer who records such an invoice.
- SETTLEMENT OF TAX LOSSES UP TO PLN 5 MILLION
A possibility of one-time deduction of a loss up to PLN 5 million was introduced into the provisions of the PIT Act and the CIT Act with an amendment which came into force on 1 January 2019. It should be remembered that, according to the transitional rules, the new principles may be used only in respect of tax losses occurring after 1 January 2019. This means that a loss suffered under new, advantageous principles, can be deducted in the tax return for 2020 at the earliest, provided that a tax loss for 2019 is demonstrated.