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Changes in VAT: Taxation of financial services, Promotion of non-cash payments in Poland and Changes to binding rate information [Polish Deal]

In July, the Polish government presented a bill to introduce broad changes to tax and insurance laws, known as the “Polish Deal.” In addition to changes in income taxes, the bill also provides for significant changes in VAT.

Today we describe the changes regarding:

  1. Changes in the form of options for taxing financial services,
  2. Promotion of non-cash transactions in Poland, introducing a quick VAT refund for non-cash taxpayers,
  3. Changes to binding rate information.

Taxation of financial services

The bill provides for changes in the form of the possibility for a taxpayer to elect VAT taxation of financial services.

Under Art. 135(1)(b)–(g) of Directive 2006/112/EC, financial services are generally exempt from VAT. However, member states have the option of introducing a choice by a taxable person to tax financial services supplied by it. It should be stressed that this tax option does not apply to insurance services.

The services for which this option could be elected would be:

  • Transactions, including brokerage, in currencies, banknotes and coins used as legal tender
  • Fund management
  • Credit or cash loan granting services and intermediation in the provision of these services and credit or cash loan management by a lender
  • Services involving the granting of sureties, guarantees and other security for financial and insurance transactions, as well as intermediation in the provision of these services, as well as loan guarantee management by a lender
  • Services involving the deposit of funds, maintenance of cash accounts, all kinds of payment transactions, money orders and transfers, debts, cheques and bills of exchange, and brokerage services in the provision of these services
  • Services, including brokerage services, the subject of which are shares in companies or other legal persons
  • Services relating to financial instruments and intermediation services in this area.

NOTE!!! The option to tax financial services will only apply to services provided to VAT payers. Financial services provided to non-taxable individuals will continue to be compulsorily exempt from VAT.

Promotion of non-cash payments in Poland

Promotion of non-cash turnover is to take place through the introduction of a quick VAT refund (i.e. within 15 days) for taxpayers using cashless methods for the majority of their turnover.

A refund could be obtained within this period after meeting a number of conditions, including that the excess input VAT over output VAT to be refunded could not exceed PLN 3,000.

Changes to binding rate information

In connection with changes to the Tax Ordinance introducing a new institution, the investment agreement, which would also include issues that are the subject of binding rate information (determination of the classification and VAT rate for goods or services subject to certain VAT-taxable transactions), the regulations on binding rate information are to be revised in this respect. The purpose of the changes is to introduce provisions eliminating the possibility that the same entity could apply for interpretations (indication of the classification of goods/services and VAT rates) in the same scope, in two different forms at the same time, and thus there would be no duplication of decisions on an investment agreement already in force.

These changes in the field of VAT are included in Art. 12 of the proposed amending act (pp. 173 and following). The entire bill can be found at the following link: https://legislacja.gov.pl/docs//2/12349409/12805420/12805421/dokument514502.pdf

Gerard Goliasz
Tax Specialist

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