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SLIM VAT 2: Simplified VAT settlements enter into force in October

From the start of 2021, taxpayers in Poland were presented with the first act of the Slim VAT project (short for “Simple Local and Modern VAT”), aimed at simplifying VAT settlements.

The Slim VAT 2 package, the next amendment to the VAT Act, enters into force on 1 October 2021 (although some of the provisions are already in force, as discussed at the end of this article). According to the Ministry of Finance, the aim of the new package is to simplify settlement of VAT by taxpayers and to adjust the Polish regulations to reflect the UK’s departure from the EU.

The amendment is also intended to implement the judgments of the Court of Justice of the European Union in C-335/19, E. Sp. z o.o. Sp. k. v Minister Finansów, and C-895/19, A. v Dyrektor Krajowej Informacji Skarbowej.

Key changes introduced by Slim VAT 2:

1.      Introduction of a regulation defining the supply to which a dispatch or transport should be assigned when the organizer of the transport is the first supplier or last acquirer, in the case of export of goods or intra-Community supply of goods:

a)     When the organizer of the transport is the first supplier, the organizer’s supply will be a movable supply enjoying a 0% VAT rate, upon fulfilment of additional conditions

b)     When the organizer of the transport is the last acquirer, the supply to that acquirer will be a movable supply enjoying the aforementioned preference.

However, when the first supplier or the last acquirer carries out the dispatch or transport of the goods to another entity in the chain, this newly introduced provision will not apply.

2.      Abandoning the provision conditioning deduction of input VAT in the same period in which output VAT was recognized on recognition of input VAT within three months after the end of the month in which the tax obligation arose, involving intra-Community acquisition of goods and import of services (implementation into the Polish legal system of the judgment by the Court in C-895/19, A. v Dyrektor Krajowej Informacji Skarbowej)

3.      Enabling correction of a tax declaration, directly within a declaration, for a taxpayer settling tax on the import of goods, in a situation in which the taxpayer did not settle the correct amount of the tax in the original declaration. The taxpayer will be able to file the relevant correction of the declaration within 4 months after the month in which it should have settled the tax on import of goods.

4.      Introduction of changes in the relief for bad debts:

a)     Abandoning the condition enabling correction of output VAT on supply of goods or services to a VAT payer, registered as an active VAT payer, not in the course of restructuring or bankruptcy proceedings or in the course of liquidation.

Unlike now, these conditions will not have to be met as of the day preceding the date of filing of the tax declaration in which the correction of output VAT is made.

b)     Extending to 3 years the period for making a correction. This period is calculated from the end of the year in which the invoice documenting the claim was issued.

c)     Introduction of the possibility of such a correction with respect to debtors other than those registered as active VAT payers, on the condition that:

  i.      The claim was confirmed by a legally final judgment and directed to enforcement proceedings

ii.      The claim was entered in a register of debts maintained at the national level, or

iii.      A consumer bankruptcy was declared with respect to the debtor.

d)     Elimination of the duty to make a correction of input VAT by the buyer in a situation where, as of the last day of the month in which the 90th day after the payment deadline falls, the debtor is in the course of a restructuring or bankruptcy proceeding or in the course of liquidation.

5.      Modification of the definition of “member state” and “territory of the European Union,” so that the territory of Northern Ireland is deemed to be EU territory.

6.      Extension of the period for submitting information about incurring the first expenditure on a motor vehicle used exclusively for the taxpayer’s economic activity (form VAT-26). To date, this period has been 7 days from the date in which the first expenditure was incurred in connection with the vehicle. The new period will be the 25th day of the month following the month in which the first expenditure connected with the vehicle is incurred, but no later than the date of transmission of the SAF-T (JPK) record.

7.      Expansion of the number of settlement periods in which a taxpayer can take a deduction through correction of a declaration. It is indicated that in the case of import of services or supply of goods for which the reverse-charge mechanism is applicable, and for intra-Community supply of goods, corrections downward are to be made in the settlement for the period in which the reason for the correction arose, on the side of both output VAT and input VAT.

Moreover, in a case where the period for “current” recognition of a purchase invoice is exceeded, the taxpayer will be able to correct the tax declaration:

a)     For the period in which the right to reduce the amount of output VAT arose, or

b)     For one of the three following settlement periods, or in the case of a taxpayer settling on a quarterly basis, in one of the two following settlement periods, immediately after the settlement period in which the right to reduce the amount of output VAT arose

- but no later than 5 years after the start of the year in which that right arose.

8.      Admitting the possibility of filing a mutual declaration within a notarial deed by the supplier and the acquirer on election of taxation of the sale of real estate.

9.      Regulation of the issue of release of funds transferred from a closed VAT account to a so-called technical account.

10. Introduction of the possibility of issuing consent to release of funds from a VAT account if the taxpayer’s tax arrears have been deferred or scheduled for payment in instalments.

11. Admitting the possibility of transferring funds between VAT accounts operated by different banks. So far this possibility has applied only to funds in VAT accounts operated by the same bank.

12. From 1 January 2022, the possibility of charging a VAT account will be expanded to include transactions for payment of amounts due for farmers’ social insurance or health insurance contributions.

13. Change in item 60 in Annex 15 to the VAT Act (computers and other machines, as well as parts for them).

The amending act enters into force on 1 October 2021, except for:

1)     Art. 1(5) and (7)(a)–(c) (changes involving import of goods and settlement of input VAT on transactions subject to the reverse-charge mechanism, and intra-Community acquisition of goods), which entered into force on 7 September 2021

2)     Art. 2(1)(b), first bullet point, involving expansion of the scope of charging VAT accounts, which will enter into force on 1 January 2022.

The text of the amending act is available at this link.

Gerard Goliasz
Tax Specialist

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