VAT grouping rules again postponed
New rules providing for the creation of a VAT group in Poland have again been postponed—this time until 1 January 2023 (for prior coverage, see the articles in the January 2022 and October 2021 issues of Indirect Tax News). The VAT group regime, which is modelled on the EU VAT directive and regulations, originally was intended to apply as from 1 January 2022 and then postponed until 1 July, but implementation is once again delayed.
The structure of a VAT group is similar to that of a tax group for corporate income tax purposes. A VAT group is formed when several entities become a single VAT taxable person and the group is represented by an entity indicated in the group formation agreement. The formation of a group has both administrative and financial benefits for its members. For example, a VAT group is treated the same way as a single taxable person registered for VAT on its own, i.e., all transactions carried out by individual group members are considered to have been carried out by the VAT group as a single taxable person. Supplies of goods and services made by one member of the group to another group entity are disregarded and not subject to VAT, so VAT invoices do not have to be issued and there are fewer documents to be processed, the group has a single VAT registration number and only one VAT return is submitted on behalf of all companies in the group.
The following requirements will have to be met to set up a VAT group in Poland:
- All group members must have their place of establishment in Poland, or if there is no place of establishment in Poland, the taxable person carries out activities in Poland through a local branch;
- The group entities must be financially, economically and organisationally linked and all three links must exist during the entire period the VAT group is in existence;
- The VAT group must be formed for at least three years; and
- The group cannot be expanded or reduced during its term (subject to certain exceptions).
A VAT group will forfeit its status if it fails to meet any of the above requirements.
Entities comprising the VAT group will be jointly and severally liable for VAT during and after its existence. Proportionate VAT settlements apply at the entity level, depending on the share in transactions and at group level if it is not possible to attribute taxable transactions by entity. Electronic records will be mandatory for intragroup transactions.