On 18 August 2020 the Polish government published a draft of an amendment to the Polish VAT Act. The bill introduces a package of measures called SLIM VAT. The term SLIM VAT stands for “Simple Local and Modern Value Added Tax” as it simplifies VAT settlements in Poland. In our article we summarise the main changes proposed as part of the SLIM VAT package.
More time for exporting goods for which a prepayment has been received
According to the Polish VAT regulation, if an exporter receives a prepayment then in order to apply the 0% VAT rate for the export transaction the goods should be transferred within two months. Under the proposal of the SLIM VAT package, the exporter will have six months to move the goods across the border applying the 0% VAT rate.
Possibility to choose currency translation for VAT purposes
The regulations on currency translations for VAT purposes will now allow the same translation rules as those applicable for income tax. As proposed in the SLIM VAT package, taxpayers will be able to select the option where currency invoices are translated in accordance with the same rules as those applicable for income for income tax purposes. If choosing this option, it should be used for at least 12 months from the first day of the month in which it is applied.
More time for input VAT deduction
Taxpayers in Poland presently have three months to deduct input VAT in current VAT returns. According to the SLIM VAT package they will be entitled to deduct input VAT within four months, i.e. in the month of receipt of an invoice and the three following periods.
Changes concerning correcting invoices
In respect of downwards adjustments correcting invoices, to reduce the output VAT suppliers are obliged to receive confirmation that the purchaser has received the correcting invoice. This obligation will be eliminated as the SLIM VAT draft allows the supplier to reduce output VAT based on the date the correcting invoice is issued, on the condition that the reduction in transaction value is agreed with the purchaser.
The Polish VAT Act will be also complemented by regulations concerning the recognition of upwards adjustments correcting invoices. This issue is currently only based on the business practice and approach of the tax authorities, so these regulations are more mandatory in nature.
Tax free documents in electronic form
The SLIM VAT proposal provides among other things for the electronic form of documents in the tax free system. It improves the procedure of VAT refunds for travellers. Within this solution, the whole process of VAT refunds would be simplified and automated, both for sellers and travellers. However, from the perspective of tax authorities it allows them to counter fraud and irregularities in this area.
Other changes in the SLIM VAT package
The SLIM VAT package also introduces changes in respect of:
- the limit for low-value gifts – this will be increased from a PLN 10 (roughly EUR 2) to PLN 20 (roughly EUR 4) per unit cost (low-value gifts do not need to be included in VAT records);
- the possibility to deduct input tax on accommodation services purchased for resale;
- clarifying the definition of value that determines the obligatory split payment mechanism, i.e. the value of an invoice equal to or higher than PLN 15,000 (roughly EUR 3,375).
Most of the changes are expected to enter into force on 1 January 2021.
The proposal is currently undergoing the intra-cabinet approval process. However, as there is not much time left until its introduction, it is expected that the final scope of changes will be established soon.
If you would like to know more about the introduction of the SLIM VAT measures in Poland, please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative of WTS Global for Poland.