Slim VAT 3 – summary of major changes
On 5 June, the Act of 26 May 2023 amending the Value Added Tax Act and some other acts (“Slim VAT 3”) was published in the Journal of Laws.
Presented below is a summary of the most important changes introduced upon this Act.
Leniency resulting from the ECJ judgment in case C-935/19
In its judgment in case C-935/19 the European Court of Justice stated that the EU regulations prevent the application of the 20% VAT sanction (an additional VAT liability) as applicable in Poland. The Court was of the opinion that the wording of the regulations forced an automatic application of the VAT sanction and prevented its adjustment to the circumstances of a given case. We discussed the judgment in more detail in our newsletter.
Following the changes, the tax authorities imposing the VAT sanction can assess its value in a way which takes into account, without limitation, the circumstances of the case, the nature, gravity and frequency of the breach, its value and measures taken by the taxable person to rectify the breach.
In practice, the change means that the VAT sanction will amount to 30, 20 or 15% of the value of the non-compliance in VAT settlements. 100% VAT sanction can be imposed if the non-compliance resulted from an intentional action of the taxpayer or the taxpayer’s counterparty of which the taxpayer was aware.
Changes alleviating the VAT sanction took effect one day after publication of the Act (i.e. on 6 June 2023) and apply also to tax proceedings, tax inspections and customs & fiscal audits commenced and not closed before the effective date of the Act.
Changes regarding binding information
Competence of a single authority
Following the changes, the same authority, i.e. the Head of the National Fiscal Information, is competent to issue and consider appeals in respect of binding rate information (BRI), binding excise information, binding tariff information and binding origin information.
Changes to BRI
The fee for issuance of binding rate information was cancelled (it was PLN 40), but it is still necessary to pay for tests or analyses performed.
The list of entities authorized to apply for BRI has been extended to include:
- public entities –to an extent affecting the manner of calculation of remuneration in connection with a public-private partnership agreement, and
- ordering/contracting parties within the meaning of regulations governing concession for construction works or services – to an extent affecting the manner of calculation of the remuneration for the concession holder along with potential payment from the contracting party in connection with the concession agreement concluded for construction works or services.
The amended Act explicitly provides that BRI is binding not only for tax authorities but also the taxpayer. This rule also applies to BRI issued before 1 July 2023.
Waiver of the requirement to have an invoice to settle the input VAT under ICA.
According to the amended provisions, there is no requirement to have an invoice documenting ICA within three months of the end of the month in which the tax obligation arose with respect to the acquired goods in order to deduct the input VAT under this acquisition. This means that the input and output VAT on account of ICA will be settled in the same account period with no need to satisfy additional conditions.
Rules for the use of the exchange rate for correction invoices
The Act defines the rules for application of an exchange rate to correct the taxable base. In principle, the rate under the original invoice will be used both with respect to a negative correction and a positive correction. As an example, a taxpayer who used the rate of 1 October 2021 for a service will also use the same rate when issuing an invoice correcting the original settlement.
In a situation where the taxpayer issues a collective correction invoice to document a discount, the taxpayer will not be obliged to use the original rate with respect to each of the corrected transactions. The conversion will be made according to the average rate for a given currency, as announced by the National Bank of Poland on the last business date preceding the corrective invoice issuance (the EBC rate can be used, as appropriate).
The Act provides for the same solutions with respect to a buyer who is a taxable person under a given transaction (ICA, service import, acquisition of goods in Poland from a foreign taxpayer), who receives a discount or reduction of the price from the counterparty that issues a collective correction invoice to him.
Increased limit of sales for a small taxpayer
The Act increases the limit of sales for a taxable person to be recognized as a small taxpayer to EUR 2 million gross (currently EUR 1.2 million). The ‘small taxpayer’ status offers the possibility to use the cash accounting method for VAT settlement, and quarterly filing of JPK_VAT.
Changes in determining the proportion
The new regulations provide that taxable persons:
- who, in the previous tax year, did not achieve the turnover or whose turnover was lower by PLN 30 thousand (in case of proportion) or
- who were reinstated to the register and the proportion calculated according to the general rules would not be representative for them,
will not be obliged to agree the forecasted proportion of deduction with the tax authority. Instead, the taxpayer will notify the head of a tax office about the adopted proportion, which should make the procedure less formal.
Additionally, the amount at which the proportion is 100% increases from PLN 500 to PLN 10,000 in a situation where the proportion calculated by the taxpayer exceeds 98%.
The Act also provides for an optional possibility to waive correction of the deduction after the end of the tax year if the difference between the preliminary proportion and the final proportion does not exceed 2% points. If the final proportion is lower than the initial proportion, an additional condition will apply – the non-deductible input tax should not exceed PLN 10 thousand.
Other changes
The other changes introduced by the Slim VAT 3 include, without limitation:
- funds accumulated in the VAT account can be allocated to pay other taxes, e.g. the retail sale tax, tonnage tax, the so-called “sugar” tax, and the tax imposed on alcohol sold in small bottles;
- funds can be transferred from VAT accounts of members of a VAT group to a VAT account of the VAT group’s representative;
- sales recordkeeping is facilitated by the use of cash registers, e.g. there is an option not to print out fiscal documents.
The Act shall come into force on 1 July 2023, subject to certain exceptions.
Should you have any questions or doubts regarding the issues discussed here, we are ready to help you. Feel free to contact us.