Slim VAT – Draft Explanations

2021 / 01 / 22

1 January 2021 marks the date of implementation of the Slim VAT package to the Polish Value Added Tax Act. The package is intended to facilitate VAT settlements. As the changes are extensive, on 18 January 2021 the Ministry of Finance published draft Explanations of the Slim VAT package and selected solutions elaborating on some VAT structures introduced upon the Act of 27 November 2020 amending the Value Added Tax Act and certain other acts (Journal of Laws Item 2419) (hereinafter Draft Explanations) which are to serve as practical guidelines in this respect.

Draft Explanations – contents

The document comprises 49 pages of additional information on:

settlement of positive and negative adjustment invoices
extended deadline for deduction of VAT charged on a current basis for up 4 account periods in total if settlements are made on a monthly basis
consistent currency exchange rates – adding an optional conversion, in the context of VAT, of the taxable base expressed in a foreign currency according to the rules of converting revenues laid down in the income tax regulations
the possibility to deduct input VAT under invoices for purchase of overnight accommodation for resale
increased limit for small-value gifts not to be included on records – from PLN 10 to PLN 20, and the exact value adopted for small-value gifts to be included on records as a net amount (no tax),
changes to the binding rate information
changes to the split payment mechanism
taxation of advance payments against exported goods in a situation when the export deadline exceeds 6 months,

Although the document is elaborate, the contents of the Explanations largely focus on discussing the new way to account for adjusted invoices. The regulations which took effect on 1 January 2021 were intended to offer simplifications, particularly in the area of negative invoices. However, the amended regulations contain a number of uncertainties and their interpretation may raise doubts among taxpayers. The draft explanations confirm, among other things, that taxpayers – sellers should hold documentation which supports arrangements regarding new conditions of delivery which result in price reduction as well as documentation which confirms satisfaction of such conditions, while taxpayers – buyers should verify the business arrangements because they may be obliged to reduce input VAT even if they have not yet received the adjusted invoice.

As for now taxpayers may comment on the contents of the Draft Explanations until 1 February 2021, by sending their doubts and postulated solutions to the Ministry of Finance.

The draft explanations are available here: LINK

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Should you have any questions or doubts regarding the issues discussed here, we are ready to assist you.

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