SLIM VAT 3 – further simplifications in VAT settlements?
A bill of amendment to the VAT act and some other acts (known as “SLIM VAT 3”) was published on the website of the Government Legislative Centre on 8 August 2022.
The bill was also submitted to public consultations. Comments can be made until 26 August 2022.
Presented below is a brief summary of the major changes.
Increased limit of sales for a small taxpayer
The bill provides for an increase of 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 to file the JPK_VAT on a quarterly basis.
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 was 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 case). We discussed the judgment in more detail in our newsletter.
With the proposed 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 gravity and frequency of the breach, the value of the non-compliance and measures taken by the taxable person to rectify the same.
In practice, the change denotes that the VAT sanction will amount to 30, 20 or 15% of the value of the non-compliance in VAT settlements. No changes are made to the 100% sanction.
Changes to binding information
Competence of a single authority
According to the planned changes, the same authority, i.e. the Head of the National Fiscal Information, will be 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
As regards the BRI, the fee for issuance of the document (PLN 40) is to be cancelled. However, it will still be necessary to pay for tests or analyses.
Moreover, the following parties will also be entitled to file an application for the BRI:
- a public entity – to an extent affecting the manner of calculation of remuneration in connection with public-private partnership agreement, and
- the ordering/contracting party 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 new regulations will also explicitly provide that the BRI is binding for the tax authorities and the taxpayer.
Waiver of the requirement to have an invoice to settle the input VAT under ICA.
According to the bill it is no longer necessary to hold 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 bill lays down the rule regarding 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 one. 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 taxable person issues a collective correction invoice, he will not be obliged to use the original rate with respect to each of the corrected transactions – a collective rate will apply to all transactions subject to correction. 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 bill provides for the same solutions with respect to a taxpayer-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.
Changes in determining the proportion
The new regulations provide that taxable persons:
- who did not achieve turnover in the previous tax year or whose turnover was PLN 30 thousand lower (in case of proportion) or
- who are starting their business in a given year or who consider their pre-index (if any) as non-representative
will not be obliged to agree the forecasted proportion of deduction or the forecasted pre-index with the tax authority. Instead, a notification to the head of a tax office about the adopted proportion or pre-index will be implemented, which should make the entire procedure less formal.
Additionally, the amount which gives rise to recognition that the proportion is 100% is to be increased from PLN 500 to PLN 10,000 in a situation where the proportion calculated by the taxpayer exceeds 98%.
The bill provides for an optional possibility to waive the correction after the end of the tax year if:
- the difference between the original proportion and the final proportion does not exceed 2 percentage points (it seems that it is only in a situation where the final proportion is higher than the initial proportion),
- the final proportion is lower than the initial proportion (by no more than said 2 percentage points) if the non-deductible input tax resulting from the difference between the proportions and the long-term correction does not exceed PLN 10 thousand.
Other changes
- Funds accumulated in the VAT account can be allocated to pay other taxes, e.g. the retail sale tax, the so-called “sugar” tax, tonnage tax, the tax imposed on alcohol sold in small bottles.
- Exemption of the investment fund management services from VAT will be extended to include investment funds the management of which is exempt from VAT in other EU Member States.
Currently the bill is at the stage of reviewing. It is planned to enter in force on 1 January 2023, subject to some exceptions indicated in the bill.
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