The end of the year is the traditional time of adopting changes to tax law. This year, the issue of income taxes is the most controversial. Nevertheless, the value added tax (VAT) includes issues worth attention.
Below, we would like to present you a synthetic overview of current issues, important for VAT settlement.
1. Amendment to the provisions of the VAT Act – the so-called “SLIM VAT package”
The “Slim VAT” package is promoted as a pro-business activity that meets the demands of the market and aims to simplify the tax. SLIM is to be an acronym, made of the words “simple, local and modern”.
The changes concern, among others, the following areas:
- increasing the limit for small value gifts from PLN 10 to PLN 20;
- currently, the seller needs to possess a confirmation of receipt of the correcting invoice by the purchaser. It is proposed to change this requirement into necessity of “agreeing” with the buyer the terms indicated on the correcting invoice;
- codification of the principle that the tax base is increased at the time when the reason for the correction arises;
- possibility of using one exchange rate for income tax and for VAT;
- extension of the deadline for the export of goods to maintain the 0% rate for advance payments in exports (from 2 to 6 months);
- deadline for current VAT deduction – extension from 3 to 4 months;
- exclusion of the use of split payment mechanism also for netting;
- binding rate information (WIS) is to be valid for 5 years from the date of issuance (also applicable to already issued);
- introducing a deduction of input VAT on accommodation costs, if purchased for resale;
- introduction of an electronic document circulation TAX FREE and electronic confirmation of the exportation of goods.
In practice, apart from the facilitation changes, one of the solutions may become a source of potential problems. It is the issue of “in minus” corrections of input VAT. Currently, in the case of issuing a correcting invoice, the buyer is obliged to reduce the input VAT in the settlement for the period in which the invoice was received. According to the proposed change, this obligation will arise in the settlement for the period in which the conditions of the reduction were agreed.
The concept of “agreement” is also unclear. Thus, there will be situations where the business arrangements will precede the issuance and forwarding of the corrective invoice to the buyer. In this case, it may turn out that if the taxpayer is waiting for a correcting invoice, it will fall into tax arrears. This will happen if one receives it in the following month or months. Therefore, the proposed solution is impractical, especially for large taxpayers whose sales and accounting functions are separated.
Currently, the project has been approved by the Council of Ministers and submitted to the Sejm. The planned entry into force is the beginning of 2021.
2. Amendment to the provisions of the VAT Act – the so-called “e-commerce package”
A few days ago, a draft amendment to the provisions of the VAT Act was published, implementing the provisions of the so-called “e-commerce package”.
The purpose of the changes is to tighten the collection of tax on cross-border trade, in particular in the field of electronic products.
The tax exemption is to be terminated in case of import of goods, where the total value of the shipment does not exceed the value of EUR 22. The draft provides for the imposition of obligations regarding the collection and payment of VAT and keeping relevant records on entities such as trading platforms. The general idea behind the changes is to shift the obligation to pay the tax from the foreign supplier to the next stages of delivery so that it is effectively paid.
The special procedure MOSS (Mini One Stop Shop) will be modified to the special procedure One Stop Shop (OSS). It is currently applied to telecommunications, broadcasting and electronic services, and after the amendment also to other services provided to consumers, intra-Community distance sales of goods and delivery via electronic interfaces. This simplification makes it possible to settle VAT in the country of the supplier’s seat, without the need to register in the country of the customer.
The project is at the stage of legislative work at the Ministry of Finance. The planned entry into force is July 2021.
3. Judgment of the EU Court of Justice in case C-335/19
The provisions of the VAT Act do not allow for the correction of output VAT, due to the so-called “bad debt relief”, if, on the day preceding the submission of the corrected declaration, the debtor:
- was not registered as an active VAT payer;
- has been in the process of insolvency, restructuring or liquidation.
Such requirements effectively prevented the correction of a significant part of output VAT that was not paid to the creditor by the debtor.
In the judgment of October 15, 2020, the Tribunal ruled that the above-mentioned requirements are inconsistent with the provisions of the VAT Directive, and its provisions in the analysed scope are directly applicable.
This means that taxpayers may refer to the so-called direct effect of EU law and correct the output VAT, disregarding the domestic regulation that is inconsistent with the law of the EU.
It is therefore worth identifying whether the taxpayer has such situations.
4. Fiscal receipts up to PLN 450 not to be treated as invoices
The Ministry of Finance proposes that the fiscal receipt with the buyer’s NIP (TIN) number up to the amount of PLN 450 should not be treated as a simplified invoice, unless it also contains the buyer’s data: name (name and surname) and address.
In such a situation: the buyer will be able to request a VAT invoice for such a receipt, and the seller will not report it separately in JPK_VAT.
The planned entry into force of the regulation is January 2021.