“White list” of VAT-payers – how to prepare for changes?
On September 1, 2019, some of the provisions amending the Value Added Tax Law as well as some other acts will come into force and they introduce the so-called “white list” of VAT-payers. The “white list” of VAT-payers is aimed at facilitating due diligence in verification of contractors for the VAT purposes and implements the obligation to make payments for VAT invoices to bank accounts indicated in the list of taxpayers run by the Head of the National Tax Administration.
However, sanctions for non-compliance with the above obligation will apply no sooner than as from January 1, 2020.
Upon the changes in law, special attention will have to be paid to transactions concluded with foreign companies registered for the VAT purposes in Poland.
What is being changed?
The “white list” of VAT-payers will constitute a complete register of VAT-payers replacing the existing registers run by the Minister of Finance and the Head of the National Tax Administration. The new register will be kept by the Head of the National Tax Administration and as from September 1, 2019 at the latest it will be made available on the website of the Ministry of Finance as well as on the webpage of the Central Register and Information on Economic Activity (CEIDG). It will be possible to search for the information in the register by entering a tax identification number or a company name.
Data contained in the register will be updated on a daily basis – on every business day. In comparison to data contained in the currently existing registers, the “white list” will contain in addition the bank account numbers of taxpayers opened in connection with their business activity, reported in the taxpayers’ identification/update declarations and confirmed by the clearing house’s IT system (STIR). If data contained in the “white list” turns out to be incorrect or untrue, a taxpayer will be entitled to apply to the Head of the National Tax Administration for its correction or deletion.
In connection with the above, it will also be required that each payment for the delivery of goods or the provision of services, made by a registered active VAT-payer and confirmed by a VAT invoice, should be made to the bank account indicated in the “white list”. However, this requirement will apply only to transactions with a one-off value exceeding PLN 15,000 (VAT inclusive). The number of payments resulting from a transaction will be irrelevant and thus, dividing the amount resulting from one invoice into several instalments or issuing several invoices for smaller amounts to document one transaction with a total value exceeding the indicated threshold will not facilitate the evasion of the new regulation. Transactions in foreign currencies will be converted into Polish currency at an average exchange rate of the National Bank of Poland from the last business day preceding the day when the transaction is made.
An entrepreneur who makes a money transfer to a bank account other than the one indicated in the “white list” will be deprived the right to treat such expenditure as a tax deductible cost. If the expenditure has already been deducted as tax deductible costs (before payment), a taxpayer will be obliged, in the month in which the order for the money transfer was placed, to reduce the amount of tax deductible costs accordingly. Alternatively, if tax deductible costs in that settlement period are too low, the taxpayer will be obliged to increase its tax revenues accordingly. In addition, such an entrepreneur will be exposed to a joint and several liability with the seller for output VAT that the seller did not settle on the transaction. Therefore, the consequences of transferring the money to an incorrect bankc account will be severe.
In order to protect yourself from negative consequences of payments made to bank accounts outside the “white list”, such transfers should be reported to the head of the tax office competent for the invoice issuer. The report should be filed within 3 days from the date of placing the ordering for the money transfer. The payment in the split payment formula will exclude the joint and several liability for output VAT not settled by the seller but it will not prevent the taxpayer from the obligation to exclude expenditure from tax deductible costs (if paid to a bank account outside the “white list”).
Watch out for foreign companies registered for the VAT purposes in Poland
The requirement to make payments to a bank account from the “white list” will apply only to purchases of goods and services from entrepreneurs registered for the Polish VAT purposes as active VAT-payers. Thus, the new regulations will not apply to purchases made from foreign companies that do not run any business activity in Poland.
However, the problem may arise in the case of foreign companies that are registered for the VAT purposes in Poland but do not have a bank account operated by a Polish bank (formally, there is no such requirement). It may turn out that in practice, such companies will be forced to open a bank account in a Polish bank and report this fact to a tax office. At the moment, it is not known whether bank accounts operated by foreign banks, even if disclosed to a Polish tax offices by foreign companies in their identification/update declarations, will undergo the verification by the clearing house’s IT system (STIR) and whether such bank accounts will be disclosed in the “white list”. According to recent press releases, the Ministry of Finance is of the opinion that bank accounts operated by foreign banks and reported by a foreign company to a Polish tax office will be disclosed in the „white list” of VAT-payers. However, if after launching the “white list” it turns out that bank accounts operated by foreign banks and reported to a Polish tax office are not disclosed in the “white list”, it will be advisable to take immediate actions by foreign companies registered for the Polish VAT purposes aimed at opening an account in a Polish bank. Otherwise, payments made by Polish contractors to bank accounts of foreign companies outside the “white list” will have to be treated as non-tax deductible costs. Our experience shows that setting up a bank account for a foreign company is a lengthy process and can take up to several months.
In addition, at this point, it is not known whether invoices issued by foreign companies registered for the Polish VAT purposes but under their foreign VAT numbers issued by other countries (e.g. for services provided by a principal company) could be settled through payments made to foreign bank accounts outside the “white list”. The literal wording of the provisions indicates that in such a case, a money transfer to a bank account outside the “white list” will result in adverse effects for the buyer since expenses paid this way will be non-tax deductible.
“White list” in force as from September 2019, sanctions effective as from January 2020
The legislator gave taxpayers 4 months to adapt to law changes. Sanctions for payments to bank accounts outside the “white list” will apply no sooner than as from January 1, 2020.
Moreover, in accordance with transitional provisions, the sanction in the form of non-tax deductibility of expenses paid to an inappropriate bank account will apply to payments made in a tax year starting after December 31, 2019, provided that these expenses are deducted as tax costs no sooner than after December 31, 2019.
What actions should be taken now?
Although sanctions related to the introduction of the “white list” of VAT-payers will be effective as from January 1, 2020, it is worth taking certain actions already now in order to prepare for the application of the new regulations and to avoid potential sanctions. In particular, we recommend the following actions:
- in the first place, VAT-payers should verify their data disclosed in the “white list” of VAT-payers that is to be published at the beginning of September this year – in particular, the listed bank accounts used for business activity, on which payments from contractors are accepted, should be verified and, if necessary, an appropriate update declaration should be submitted to a tax office;
- the same verification should be carried out in relation to your regular suppliers of goods and services that are registered as active VAT-payers in Poland – if necessary, you should ask them to update their data reported to the tax authorities, in particular the bank account numbers to which the contractors request payment of invoices;
- special attention should be paid to contractors that are foreign entities registered for the VAT purposes in Poland – in practice, it may turn out that they will be forced to open an account in a Polish bank and report this fact to a Polish tax office;
- one should consider the implementation of internal procedures of auditing and verifying contractors (including their bank accounts) as well as the purchase and the subsequent implementation of an IT tool that will automatically verify the status of suppliers as VAT-payers and the supplier’s bank account numbers to which money transfers are made – however, please note that according to recent press releases, the automatic verification of suppliers in the “white list” is to be limited, i.e. only 10 queries for the maximum of 30 entities could be submitted per day.
If you would like to get more information about changes described above or discuss their impact on your business, we would be more than happy to be of assistance to you.