VAT simplification measures under consideration
The Polish government is working on the draft of a new package of changes to the VAT rules, referred to as “Slim VAT 3,” that would simplify VAT compliance for businesses by eliminating formalities, easing penalties and introducing new foreign exchange rate rules when VAT invoices are corrected. The measures are expected to be approved by the end of 2022 and would apply as from 1 January 2023.
The main proposals include the following:
- The sales threshold for small taxpayers to settle VAT using the cash method (rather than the accrual method) and file quarterly VAT returns would be increased to EUR 2 million (i.e., the same as the limit for income tax purposes), which would expand the number of taxable persons who are eligible to use the cash method and quarterly filing. Currently, a taxpayer qualifies as a small taxpayer if its sales (inclusive of VAT) do not exceed the PLN equivalent of EUR 1.2 million (EUR 45,000 for, among others, taxpayers that operate brokerage companies or manage investment funds and whose remuneration is commission based) in the previous year.
- The domestic penalty rules would be amended to bring Polish law in line with a 2021 decision of the Court of Justice of the European Union, in which the court held that Poland’s domestic legislation, which provides for an automatic lump sum penalty equal to 20% of an unduly claimed VAT deduction is contrary to the EU VAT directive. Poland’s existing rules do not allow the tax authorities to tailor penalties to the specific facts of a case. According to the proposals, the Polish tax authorities would be permitted to determine penalties based on the facts and circumstances of each case where there are special circumstances leading to the conclusion that the taxable person exercised due care that could be expected in the situation and the irregularity did not result in a reduction of the tax due or cannot result in a reduction of that amount.
- An invoice no longer would be required for an intra-Community acquisition of goods when deducting the related input tax from the amount of VAT due to bring Polish rules in line with EU principles. As a result, input and output VAT on intra-Community acquisitions would be reported in the same period and VAT on intra-Community acquisitions would be neutral for the taxpayer. Under existing rules, a taxpayer may deduct VAT on an intra-Community acquisition from the amount of VAT due in the same accounting period only if it receives an invoice that documents the transaction within three months following the month in which the tax liability relating to the acquisition arose. If the taxpayer does not file an amended VAT return within the three-month period, the input VAT may only be deducted in the declaration for the period for which the VAT return filing deadline has not expired.
- The rules for applying exchange rates to corrected invoices relating to intra-Community acquisitions of goods where the original invoice is issued in foreign currency would be clarified. The taxpayer would not be required to apply the initial exchange rate for each of the corrected transactions. Instead, if a collective invoice is issued to correct an intra-Community acquisition of goods in a particular period, the taxpayer would be allowed to translate the amounts in the invoice into PLN at the average exchange rate as at the last business day preceding the corrective invoice issue date.
- The requirement to print documents issued using online cash registers (i.e., fiscal reports and non-fiscal documents issued by taxable persons that record sales on online cash registers) would be abolished. Taxpayers would be able to choose whether they want to store fiscal reports and other non-fiscal documents in hard copy or electronically. It should be noted that, while the proposed amendment would mean that taxpayers would not have to print the documents, the documents still would need to be issued electronically.
- The National Tax Information director would be designated as the sole authority to issue binding tariff and rate information and to deal with appeals to make it easier for businesses to obtain the information in a single place and to standardise the information nationwide.