MT Chartered Accountants Sp. z o.o.

VAT Update

VAT regulations entering into force in 2016/2017 include, inter alia, new rules for determining jurisdiction of tax authorities in VAT matters, new rules for reclaiming VAT on mixed use purchases, and introduction of Standard Audit File obligations.

New regulations governing the jurisdiction of tax authorities in VAT matters since January 1, 2016

On September 10, 2015, the Polish Parliament passed a law on the amendment of the Tax Code and some other laws with the aim of simplifying the tax procedures for businesses and sealing off the tax collection system. The new law also amends the VAT Act by repealing provisions of Article 3  governing the jurisdiction of tax authorities in VAT matters.
The regulations in force till the end of 2015  provided a general rule where tax residence for VAT purposes was determined based on the place where the activities subject to VAT are performed. If such activities are performed in multiple places, such residence was determined based on registered address for corporations and place of residence for individuals.
As a result of repealing these regulations, the residence of taxable persons for VAT purposes will have to be determined based on the general rules for determining the jurisdiction of tax authorities set out in Article 17 § 1 of the Tax Code:
“Article 17. The rules for determining the jurisdiction of tax authorities
§ 1. Where tax legislation does not provide otherwise, the local jurisdiction tax authorities shall be determined based on the place of residence or registered place of business of the taxable person, tax payer or tax collector or en entity referred to in Article 133 Concept of a Party in Tax Proceedings, § 2.
§ 2. The minister responsible for public finances may, by regulation, determine the local jurisdiction of tax authorities in cases of certain tax liabilities or specific categories of taxable persons, tax payers or tax collectors in a manner other than that specified in § 1, taking into account, in particular, the residence or the registered place of business abroad, the place where income is earned and the location of the object of taxation.”
Consequences of the amendment:
since January 1, local jurisdiction of tax authorities will be determined not based on the place of performing taxable activities, like before, but rather based on the place of residence or registered place of business. Consequently, the amendment will lead to determining the local jurisdiction of a one tax office for one taxable person regardless of the type of tax.

New regulations governing the method of reclaiming vat on goods and services purchased for mixed use (business and non-business) purposes

On January 1 2016, as a result of amending the VAT act, new regulations for calculating the proportion of reclaiming VAT incurred on goods and services purchased and used for business and non-businesses purposes will come into force. The taxpayers who purchase goods and services that not used exclusively for business purposes will be entitled to claim back only a portion of VAT incurred on the purchase. The amount of input tax will be calculated with using so called Proportion Calculation Method.  
Taxpayers are free to choose how to determine the Proportion Calculation Method based on the data such as:
  1. average annual number of persons exclusively performing work for business purposes in the total average number of persons performing work for business and non-business purposes;
  2. average annual number of working hours worked for business purposes in the total average number of hours worked for business and non-business purposes;
  3. taxable person’s annual business turnover in the business turnover increased by income derived from other activity, including, including the value of grants, subsidies and other payments of similar nature received to finance a taxable person’s non-business activity;
  4. average annual space used for economic activities in the overall average surface area used for business and outside the business.
In accordance with paragraph 2b of Article 86, the proportion calculation method will most accurately reflect the nature of activity performed by a taxable person and his acquisitions if:
  • it allows for reduction of output tax by the amount of input tax only in respect of the portion of input tax proportionately attributable to taxable activities performed under the business
  • it objectively reflects the portion of expenses attributable to business and non-business activity, respectively, except for expenses for personal use to which Article 7 paragraph 2 and Article 8 paragraph 2 apply and expenses referred to in Article 8 paragraph 5 - in the case referred to in that provision - where these expenses cannot be fully attributed to business activity.
Entities affected by new regulations primarily include government agencies, municipal companies, associations and foundations that in addition to business activity are also engaged in activity that is not regarded as business activity within the meaning of the VAT Act.


New rules for charging late payment interest on tax arrears   

As a result of amendment of the Tax Code, new rules for charging late payment interest on tax arrears came into force on January 1, 2016.  A preferential interest rate of 50% (vs. 75% applicable in 2015.) may be used provided that the taxpayer makes a self-correction within six months of filing the original tax return and pays the tax arrears within 7 days from the date of such correction. In addition to the preferential, also penalty interest of 150% of the basic rate have been introduced. This interest shall be charged on VAT and excise duty arrears arising after 1 January 2016 in a situation where tax inspectors find that the taxpayer has failed to report or pay taxes.

Standard Audit File from 1 January 2017 also for small and medium-sized enterprises

As a result of amendments of the Tax Code,. beginning 2017, small and medium enterprises will have to complete their VAT reporting using a Standard Audit File (JPK/SAF) by the 25th day of the month following the month for which the VAT return is filed. Note that the obligation of monthly SAF reporting also applies to taxpayers who have chosen to account for VAT on a quarterly basis.
Large enterprises are obliged to submit their tax records in SAF format at the request of tax authorities since July 2016. On the other hand, micro enterprises, i.e. those employing less than 10 employees with annual sales of less than EUR 2 million will not be required to submit Standard Audit Files until January 1, 2018 .

Mini One Stop Shop (MOSS) – Accounting for VAT for Telecommunications, Broadcasting and Electronically Supplied Services provided to consumers

MOSS is a new optional system for accounting for telecommunications, broadcasting and electronic services supplied to consumers in the EU.  Businesses will be able to account for VAT through a web portal of one Member State where they have a fixed establishment rather than registering for VAT in all EU countries in which the consumers reside.
Taxpayers who want to take advantage of the MOSS system are required to complete registration by filing a  VIU-R form by means of e-Deklaracje web portal to the Second Tax Office Warszawa Warszawa – Śródmieście with a declaration confirming that their business address is consistent with data provided in the VAT-R form.

Reverse charge mechanism in VAT (amendment of Appendix 11 to the VAT Act)

According to planned amendment, the reverse charge mechanism will cover new items, including gold (raw material or semi-finished product, 325 or more) and supplies of investment gold where taxpayer has opted for taxation, ribbed sheets of non alloy steel and mobile phones including smart phones. The extension will be introduced as part of the effort to combat VAT fraud.

Changes in VAT registration – no obligation to provide confirmation

Tax offices will issue conformation of registration of a taxpayer as “active VAT payer” or “exempt VAT payer” only at the request of the party concerned. As a result, no payment of PLN 170 to confirm registration on VAT-5 form will be required for a taxpayer to register for VAT.

Cash register obligation exemptions

The Minister of Finance Regulation dated November 4, 2014  concerning certain exemptions for record keeping by means cash registers introduced exemptions for taxpayers performing telecommunications services.
Taxpayers may benefit from the exemption for sales of tangible and intangible fixed assets that are subject to depreciation provided that all sales are documented by means of an invoice.
The list of activities subject to record keeping obligation by means of cash registers has been extended by, inter alia, supplies of digital and analogue data carriers, perfumes and eu de toilette (save for goods supplied onboard of airplanes), provision of services, car repair, tyre exchange and vehicle inspection services, medical care provided by medical practitioners and dentists, legal (save for notary services) and tax advisory services, restaurant and catering services, save for services performed onboard of airplanes, in public and non-public education establishments and offered to students, teachers and staff.
For more information please call us at 604 235 897 or send us an email at mtarnowska@mtca.pl.