Planned changes to VAT – SLIM VAT, BRI, SPLIT PAYMENT
The Ministry of Finance plans to implement changes to the goods and services tax (VAT).
The bill dated 14 August 2020 amending the VAT Act and the Banking Law provides, without limitation, for introduction of a package facilitating VAT settlement (Slim VAT: Simple Local and Modern VAT).
Apart from the Slim VAT, the amendment also provides for changes to the Binding Rate Information (BRI), the split payment mechanism, and the scheme of tax refund to tourists (TAX FREE).
Most of the legislative changes are planned to take effect on 1 January 2021, except for the TAX FREE system changes, which are to come to force at the beginning of 2022.
1. Simplification of settlements – Slim VAT
- Negative adjustments of invoices: the formal requirement whereby the buyer of the goods or the service recipient need to confirm receipt of the adjusted invoice is planned to be waived. Taxable persons will reduce the tax base and the output VAT during the period of issuance of the adjusted invoice, provided that they hold documentation confirming that the terms of the transaction were agreed with the buyer of the goods or the service recipient. During the same period, the buyer will be obliged to make the appropriate adjustment to the input VAT which results from the arrangement made between the taxpayers.
- Positive adjustment to invoices: settlement will be made by taxable persons on a current basis, in the period of the adjusted invoice issuance (in connection with the causes which occurred after the sale). No legal regulations governing such adjustments existed before.
b. Exports of goods
- The deadline for exporting goods to apply 0% rate on prepayment will be prolonged from 2 to 6 months.
c. The same rates of exchange as the income tax
- Taxpayers will be entitled to select the conversion of foreign currency-denominated amounts to PLN for VAT purposes according to the rules applicable under income tax regulations. This solutions will be banned in situations were no conversion is to be made, according to the income tax acts (e.g. in case of intra-Community acquisition of goods or imports of services for which VAT is settled by the buyer).
d. Extended deadlines for VAT deduction
- The right to deduct is extended by one month for monthly settlements – taxpayers will be entitled to recognize an invoice in total over four months with no need to adjust the tax return.
e. Possibility to deduct VAT under invoices for purchase of overnight accommodation for resale
f. Increased limit for small-value gifts not to be included on records – from PLN 10 to PLN 20
2. Changes to BRI
As planned, no BRI can be issued in situations of pending tax proceedings, inspections, which will also apply to proceedings opened and not finished before the effective date of the new regulations.
However, for goods identified in VAT, BRI can be obtained also according to the Polish Classification of Products and Services (PKWiU), which means that the scope of BRI will be extended, as it now applies only to goods identified according to the Combined Nomenclature (CN).
Moreover, BRI issued after the effective date of the planned act will be in force for 3 years from its issuance, same as the Binding Tariff Information (at the moment BRI is valid for an indefinite term). BRI issued before the effective date of the Act (i.e. before 1 January 2021) will remain valid for 3 years from the effective date of the regulations (i.e. until 31 December 2023).
3. Changes to split payment
First of all, exemption from the obligation to apply split payment was extended to include all types of deductions, not only those governed by the Civil Code. So far only “Code-regulated” deductions were excluded from this obligation.
Also the scope of payment which can be effected from the VAT account was extended to include the amount of tax from imports of goods or payments to customs agencies.
Additionally, the rule that in certain situations the VAT sanction will not apply was introduced for payment of an invoice through split payment (up to the amount paid using this mechanism).
Also Annex 15 (the list of goods and services from which split payment is made) will be amended. At the moment, the goods and services listed in the annex are identified according to PKWiU 2008. The amendment introduces the rule that, starting from 1 January 2021, the current classification, i.e. PKWiU 2015, will apply in this respect. According to the opinion of the Ministry of Finance, expressed in the explanatory memorandum, identification of goods under annex 15 according to CN, as postulated by taxpayers, was not possible.
4. Tax refund to tourists – TAX FREE
The last essential change resulting from the above bill of amendment applies to the tax refund for tourists. Starting from 1 January 2022, the procedure of issuance, confirmation and settlement of TAX FREE documents will be made via electronic flow of TAX FREE documents registered in the national ICT system for processing documents which are the basis for VAT refund to tourists. Currently, taxpayers apply regulations which require the flow of paper documents and stamps affixed by the customs and fiscal authorities. Sellers who use this system can issue documents, keep records and electronically obtain confirmation of export of goods through PUESC (Electronic Service Platform for Customs Services). Additionally, the obligation to use online cash registers is to be introduced for the sale of goods in a TAX FREE system starting from 1 January 2022.
Presented below are the major changes resulting from the amendment. If you wish to get more information about the changes, or discuss their impact on your business, we are at your service.