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.

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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.

A SLIM VAT as a package of new solutions in Polish law bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.

The main element of the anti-crisis tax package: loss carry-back 

A significant part of the Czech anti-crisis tax package deals with the long-discussed introduction of “loss carry-backs” in the field of income tax. The concept of a tax loss carry-back was brought about Liberating Package II in March 2020, and enables both natural and legal persons to retroactively apply their 2020 tax losses to their 2018 and 2019 tax returns. In other words, both individuals and legal entities are free to amortise their losses incurred in the two previous tax years.

Taxable persons and entities can apply loss carry-backs in their additional tax returns by setting off the 2020 loss against the positive tax bases of 2018 and 2019. The tax authority will refund the excess income tax.

This measure can be applied after the 2020 tax return with a tax loss is filed, i.e. not before the beginning of 2021.

Please note that the deadline for tax assessment for the tax years in which the tax base was reduced by the tax loss shall be extended in the case of a loss carry-back.

Application of reduced VAT rate to selected services 

According to the anti-crisis tax package, selected services subject to the first reduced VAT rate (15%) shall be shifted to the second reduced VAT rate (10%). These include:

• provision of accommodation services;
• admissions to sports and cultural events, museums, botanical gardens and zoos, natural reserves and national parks;
• use of sports facilities for sporting purposes;
• hammam and sauna services and similar selected facilities;
• passenger transport by ski lifts.

The second reduced VAT rate has been applicable in the cases listed above since 1 July 2020.

Road tax

 Another important element of the Czech anti-crisis tax package is the reduction of road tax on trucks. The road tax for trucks with a maximum permissible weight exceeding 3.5 tonnes shall be reduced by 25% with retroactive effect from the beginning of 2020. This measure will manifest itself in a retroactive reduction of advance tax payments to be paid in 2020.

If taxpayers did not take advantage of the “general pardon” to defer the obligation to pay road tax advances, and paid the advance in the original amount, the difference between the old and new amount shall be used to pay the remaining advances in 2020.

Extension of exemption from real estate tax 

Until now, municipalities in the Czech Republic were only able to exempt real estate from real estate tax that was affected by natural disasters (such as flooding, storms, extreme droughts). Henceforth, this exemption is also allowed in the event of a pandemic, an emergency measure under the Crisis Act, or industrial accidents.

This exemption can also be applied with retroactive effect. In fact, municipalities have to define the exempt real estate in generally binding ordinances effective until 31 March of the year following the tax year in which the emergency occurred. The exemption shall be applied in the form of an ordinary or additional tax return.

Should you have any questions or require any further assistance regarding the application of the Czech anti-crisis tax package, please feel free to contact WTS Alfery, the exclusive representative of WTS Global for the Czech Republic.

A Anti-Crisis Tax Package in the Czech Republic bejegyzés először WTS Klient Hungary | tax | accounting | payroll | advisory | HR services | digital solutions | state aid-én jelent meg.