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Amendment of the VAT Act

In November 2020 the Polish Sejm adopted with revisions the amendment to the VAT Act introducing so-called “Slim VAT.” President of Poland signed the bill on December, 21. According to the bill, it will enter into force on 1 January 2021.
Gerard Goliasz
Senior TAX Specialist

What does the Slim VAT bill cover?

1. Extension of the period for export of goods while maintaining the 0% rate with taxation of advances for export of goods, from two to six months.

2. Extension of the period for deducting VAT from two to three successive settlement periods. In the case of taxpayers settling VAT on a quarterly basis, the rule will remain unchanged, meaning that they can make a current deduction of input VAT during the settlement period in which they acquired the right of deduction, or during the two following settlement periods.

3. Consistent exchange rates – Taxpayers are given the optional solution, for determining the tax basis expressed in foreign currency, of using conversion into PLN according to the rules for conversion of revenue under the income tax regulations applicable to the taxpayer, for the purpose of settling a given transaction. (After election of this option, the taxpayer is required to apply it for at least 12 months from the start of the month in which the taxpayer made the election.) This solution applies only to taxpayers subject to income tax in Poland.

4. Introduction of the possibility of deducting input VAT under invoices documenting the purchase of lodging services for the purpose of reselling them.

5. Raising the limit for unrecorded presents of low value from PLN 10 to PLN 20.

6. No need to obtain confirmation of receipt of correcting invoices issued by the seller on the minus side. From the new year, a reduction in output VAT arising under a correcting invoice can be made during the period in which the taxpayer issued the correcting invoice, on condition that:
a. The documentation in the taxpayer’s possession shows that the conditions for reduction of the tax base specified in the correcting invoice were agreed with the buyer, and
b. These conditions were fulfilled, and the correcting invoice is consistent with the documentation in the taxpayer’s possession. The buyer will also be required to correct the input VAT during the settlement period in which these agreed conditions were fulfilled. According to the justification for the bill, such documentation might include commercial documents, such as annexes to contracts, commercial correspondence, proof of payment, rebates, etc, confirming that both parties to the transaction are aware of and accept the new, revised terms of the transaction. In our opinion the easier method for confirming these conditions will be documents showing payment or refund of payment. Because this provision is not precise, only the practice of the tax authorities will reveal what documents they find acceptable. However, these conditions do not apply inter alia in the case of export of goods, intra-Community supply of goods, and supply of goods and performance of services where the place of taxation is outside Poland. According to the interim provisions, the taxpayer may continue to apply the existing regulations through the end of 2021, but on the condition that prior to issuing the first correcting invoice in 2021 the taxpayer enters into a written agreement with the buyer on this issue. The taxpayer may resign from this election at the earliest three months from the end of the month in which the election was made, also on the condition of concluding a written agreement.

7. Inclusion in the act of a provision on settlement of correcting invoices raising the price. This solution confirms the existing practice under which when the tax basis is increased, the correction of the basis is made in the settlement for the period in which the reason for increasing the tax basis arose.

8. Exemption from the use of the mandatory split payment mechanism in the case of making setoff of receivables, in the extent to which the amounts of the receivables are set off.

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