Major VAT changes ahead, American Investor, Winter 2013
The most extensive set of amendments to Poland’s VAT Act in nearly a decade will become effective in April 2013 and January 2014
The final wording of new amendments to the VAT Act was determined on December 7, 2012, when the lower house of the Polish Parliament accepted the Senate’s revisions to the proposal previously adopted by the Sejm. The effective date of the amendments was postponed, and now most of the changes will go into effect on April 1, 2013, and some not until January 1, 2014. Taxpayers thus have some time to prepare for the upcoming changes, but it is worthwhile for them to review the changes and their current procedures for settling VAT to ensure compliance with the new rules when they come into force later in 2013 or in 2014.
New rule on when VAT obligations arise
Under the general rule currently in force, the obligation to pay VAT arises upon delivery of goods or performance of services, or if these activities should be documented by an invoice, upon issuance of the invoice. The current rule thus allows settlement of VAT on transactions occurring near the end of the month to be postponed by one month by carrying over issuance of the invoice to the following month.
The amending act will introduce a new general rule under which the VAT obligation will arise upon delivery of the goods or performance of the services. The ability to postpone settlement of VAT by issuing an invoice in the following month will thus be eliminated. This means that all VAT taxpayers should analyze the procedures they currently follow for settlement of VAT to determine whether their accounting systems book VAT based on the date of issuance of the invoice. From January 1, 2014, this method will no longer be correct, and if used after the effective date of the change will result in late payment of VAT, with negative consequences under tax law and fiscal penal regulations.
Much simpler invoicing
The amending act introduces several taxpayer-friendly changes in invoicing, further simplifying the process of issuing invoices.
First and foremost, the deadline for issuing an invoice will be extended. Currently, the general rule is that an invoice must be issued no later than 7 days after delivery of the goods or performance of the services. From January 1, 2014, it will be permissible to issue an invoice as late as the 15th day of the month following the month in which the transaction took place. It will also be possible to issue collective invoices reflecting transactions from an entire calendar month.
The act also eliminates the obligation to issue internal invoices. How to document events currently subject to the obligation to issue internal invoices will be left entirely to the determination of the taxpayer.
The act also eliminates the obligation to issue invoices documenting sales exempt from VAT. Taxpayers will be required to issue such invoices only when requested by the buyer.
Invoices documenting the sale of fuel for a passenger car will no longer have to include the registration number of the vehicle.
The procedure of “self-invoicing,” in which the buyer issues the invoice, which is currently regulated quite strictly, is also being eliminated. The method in which the seller confirms specific invoices issued by the buyer will be left to the discretion of the parties. Similarly, the method of consenting to issuance of electronic invoices has been liberalized, and will be left to the determination of the parties to the transaction.
The act introduces the option of issuance of invoices for a taxpayer by an authorized third party (e.g. a tax representative).
The rules for reduction of the tax basis by issuance of a correcting invoice are also being liberalized. The taxpayer will not necessarily be required to obtain confirmation of receipt of the correcting invoice by the buyer of the goods or services. If confirmation of receipt is not provided by the buyer, it will be sufficient for the taxpayer to document that it attempted to deliver the correcting invoice and that the buyer is aware that the transaction was carried out in accordance with the conditions set forth in the correcting invoice.
Construction sites defined
For the first time, the amending act introduces a definition of “construction site” into the VAT Act. This is a concept that has been interpreted inconsistently by the Polish tax authorities and administrative courts.
Under the amending act, a “construction site” is defined as land designated for development under the local zoning plan, or, in the absence of a local zoning plan, in accordance with a planning decision for the site issued under planning and land use regulations. With this definition included in the VAT Act, taxpayers should no longer have problems determining the proper taxation of the sale of land.
Changes concerning free-of-charge supply of goods
The act introduces additional changes in the regulations concerning free-of-charge supply of goods, clarifying that free-of-charge supply of goods is subject to taxation not only when the taxpayer was entitled to deduct all or part of the input VAT on purchase, import or production of such goods, but also when it had such a right when acquiring the constitutive elements included in the goods supplied free of charge.
The act changes the definition of product samples. It also eliminates advertising and informational materials from the list of items which are not subject to taxation when supplied free of charge. Supply of printed advertising and informational materials will continue to be free of taxation if such goods fit within the definition of gifts of nominal value.
Less-stringent requirements on intra-Community supply of goods
The amending act will permit booking of intra-Community supply of goods before the taxpayer registers as an EU VAT payer, under the condition that the taxpayer must register as an EU VAT payer by the time it files the tax declaration.
The act also eliminates the requirement to provide both parties’ EU VAT numbers in an invoice documenting intra-Community supply of goods.
New rules for acquisition of goods in Poland from nonresidents
Currently, taxpayers who acquire goods in Poland from taxpayers without a registered office or permanent establishment in Poland have been required to pay VAT on such transaction under the “reverse charge” procedure, even if the seller was registered in Poland for VAT purposes.
From April 1, 2013, this rule will change. If the seller is registered in Poland for VAT purposes, the transaction will be settled under general rules (i.e., the seller will book output VAT and the buyer will book input VAT).
New rules on tax representatives
Under current law, a tax representative may be appointed only by an entity from outside the EU which has registered in Poland as an active VAT payer. Under the new regulations, it will be possible to appoint a tax representative without the necessity of registering in Poland as an active VAT payer. This option will apply to foreign taxpayers who wish to import goods to other member states via Poland.
The recently approved amending act is regarded as the most extensive set of amendments to the VAT Act since Poland joined the European Union. The changes summarized above are just the tip of the iceberg. It is important to review all of the amendments carefully, as it may turn out that one of the changes that have attracted little notice or comment will have an important impact on the operations of the specific taxpayer.
Published in: American Investor, Winter 2013