Two years ago, the Polish government introduced a set of tax measures in order to simplify VAT settlements in Poland. Since the introduction of the first series of the SLIM VAT (Simple, Local and Modern Value Added Tax), further packages, such as SLIM VAT 2 and SLIM VAT 3 have been elaborated by the Polish Finance Ministry.
The latest version of SLIM VAT 3, i.e. a draft of amendments to the Polish VAT Act dated 8 November 2022, features, beyond the removal of legacy duties that continue to burden taxable persons but are obsolete and unnecessary in the digital tax age, some important changes over the previous proposal after the Finance Ministry took into account certain solutions proposed during the public consultation process.
SLIM VAT 2 – Tickets treated as invoices
After the introduction of the first SLIM VAT in January 2021, the second package of measures to simplify VAT regulations, has been published in May 2021. The changes of the SLIM VAT 2 affected following areas:
- Invoicing: simplified rules for correcting invoices, longer issuance deadline (up to 60 days before supply), abolition of the use of duplicates.
- Right of deduction: right of deduction through adjustment to be extended to include option to adjust by reference to one of three successive periods in which the deduction was available.
- Cross-border VAT: new rules for how to recognise correcting invoices with downward adjustments for intra-Community acquisitions and imported services.
- VAT in real estate: election of tax treatment can be made in the notarial deed.
- Split payment and relief for VAT on bad debts: funds may be transferred between VAT accounts relating to accounts with different banks, relief for VAT on bad debts will be available for longer (up to 3 years).
SLIM VAT 2 measures included a new regulation regarding the treatment of tickets as invoices. Before for a ticket to be treated as an invoice, it had to be a motorway toll ticket or a one-off ticket for transport over a distance of at least 50 kilometres.
According to the new measure, passenger carriers no longer have to issue separate invoices on request for travel below 50 kms. The customer is allowed to deduct VAT using his ticket regardless of the distance travelled, on condition the purchase is related to taxable activities.
SLIM VAT 3 – The first round
Public pre-consultations on SLIM VAT 3 started on 31 January 2022. This package included the removal of legacy duties that continue to burden taxable persons but are obsolete and unnecessary in the digital tax age.
The main SLIM VAT 3 proposals included following changes:
- a single currency exchange rate for so-called summary correcting invoices that reduce VAT (the rate to be that ruling on the day preceding issuance of the correcting invoice);
- no more duty to hold the original invoice as evidence if you wish to deduct VAT on intra-Community acquisitions of goods;
- change of the period in which an intra-Community supply of goods must be reported when adjusting your return: from the month of supply to the month in which the tax becomes chargeable;
- no more duty to issue an advance invoice where the advance payment and the supply are made in the same period of account;
- higher threshold for small taxpayers – EUR 2 million;
- increase from PLN 500 (roughly EUR 107) to PLN 10,0000 (roughly EUR 2,130) the threshold that triggers the application of the 100% deductible proportion;
- no more duty to ensure that documents from VAT cash registers are printed on paper;
- reduced rates of penalty VAT (surcharge) related to adjustments of tax return: from 20% to 10% and from 15% to 5%;
- the Director of National Revenue Information to be appointed as the competent authority for the purposes of binding rulings on rates (WIS), excise (WIA) or tariffs (WIT).
SLIM VAT 3 – The second round
After the public pre-consultations, early August 2022, the Government Legislation Centre published the proposal for SLIM VAT 3. Then it was submitted for public consultations.
Major changes in the proposal were:
- the sales limit for establishing the small taxable person status will be increased to EUR 2 million;
- in certain cases the exchange rate to be used for correcting invoices will be the rate prevailing on the day preceding the date of the correcting invoice;
- tax authorities will be able to individually vary penalty VAT (surcharge) rates where specifically warranted by taxable person’s circumstance, maximum penalty rates of 15%, 20% and 30%;
- specification of the period for which a taxable person is to report an intra-Community supply of goods where he has received documentary evidence for the transaction after the statutory time of 3 months;
- the same authority (Director of National Revenue Information) will be empowered to issue binding rate information (WIS), binding excise information (WIA), and binding tariff information (WIT);
- no formal requirement to hold an invoice for an intra-Community acquisition of goods in order to be able to deduct the related input tax;
- no duty to issue a dedicated invoice for an advance payment if the payment is received in the same period of account in which the related supply is made.
SLIM VAT 3 – New draft
In November 2022, the Polish Finance Ministry has provided a new draft of amendments to the VAT Act called SLIM VAT 3. The new proposal features some important changes over the previous version after the Ministry took into account certain solutions proposed during the public consultation process.
Changes between the new proposal and the previous version are following:
- commencement dated moved from 1 January 2023 to 1 April 2023;
- previously the taxable persons were required to translate currencies at the NBP or ECB rate prevailing on the last business day before issuance of summary correcting invoice (where Polish or foreign party issues a summary correcting invoice due to a discount or price reduction), now they would have the option of doing so; taxable persons could also rely on the general rule and apply the same rate as in the original invoice;
- the authorities resigned from additionally extending the current VAT exemption for investment fund management services onto special investment funds based in other EU Member States;
- the authorities resigned from allowing taxable persons the option to waive issuing an advance payment invoice if they receive all or some of the payment for the transaction in the same month as the transaction;
- changes were made to statement of payment recipient (in the event of creditor change) with respect to exoneration from solidary liability and flow of VAT account funds;
- with respect to quantification of penalty VAT at 100% of input tax in contested invoices, the process was refined by providing that the irregularity must result from intentional conduct of the taxable person or of his counterparty if known to him (previously the irregularity had to result from intentional involvement of the taxable person in a VAT fraud);
- the authorities scrapped the law which allowed them to charge maximum penalty tax where the irregularities resulted from intentional involvement of the taxable person in a VAT fraud;
- the new proposal defers to 1 July 2023 the commencement date of the law that allows VAT account to be used to also pay the so-called sugar tax, additional sugar tax and any interest on the tax.
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.