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Poland Aligns Itself With EU via Major VAT Law Changes

16 Jan 2013
Proposed amendments to Polish VAT law are nearing completion. The changes to be introduced focus on making Polish VAT Law compliant with EU regulations and the judgments of the European Court of Justice (ECJ).

In addition, they seek to better reflect the EU VAT Directive. Finally, some of the proposed provisions are aimed at diminishing the administrative burden on the part of taxpayers.Taxand Poland explores these amendments and their potential impact on multinationals.

The areas of VAT settlements to be affected by the amendments include:

  • inter-alia cross-border (intra-Community and export / import) transactions
  • Free of charge transfers of goods
  • Invoicing
  • Determination of the tax base
  • Recognition of tax obligation
  • The right to deduct input VAT

The amendments are planned to come into force in three parts: the first part is to become effective as of 1 January 2013, the second as of 1st April 2013 and the third - as of 1 January 2014.

The changes planned to come into force at the beginning of 2013 include the following:

  • The conditions for so-called "allowance for bad debts" shall be mitigated (inter-alia allowing the seller to correct output VAT if the buyer delays payment for at least 150 days)
  • The purchaser, who has not paid the seller for 150 days will be obligated to immediately decreases the input VAT in a VAT settlement
  • Numerous changes shall regard invoicing - inter-alia widening the possibilities for issuing collective invoices, liquidation of formalised procedure in the case of self-invoicing, and allowing for issuing of simplified invoice in certain cases.

The major changes, which will come into force on 1 April 2013, will cover a number of issues:

  • New definition of the 'sample' of a good, as 'allowing evaluation of the characteristics and properties of a good' and 'transferred for promotion purposes'
  • The free of charge transfer of gifts of insignificant value and samples shall not be subject to VAT as long as the transfer is made for the purposes of taxpayer's business activity (excluding the transfer of printed advertising and information materials which remains subject to VAT)
  • Import of goods shall be defined as transport of goods from the territory of a third country to the territory of EU
  • To be classified as export, the export procedure must begin in Poland or in another EU country. The documentation requirements for export shall be mitigated by allowing use of other documents than IEE-599 communication.
  • Certain time limits for exemptions from Intra-Community transactions - Intra-Community Acquisition of Goods (ICA) and Intra-Community Supply of Goods (ICS) - will be removed
  • Time limits and documentation requirements for ICS will be abolished
  • In case of selling goods in Poland, foreign entities who do have a seat or fixed place of business activity in Poland shall be obliged to register for VAT purposes and issue VAT invoices disclosing output VAT (the reverse charge mechanism will not be applied). Such foreign entities, if they come from outside the EU, will be obliged to establish their tax representative, and foreign entities from the EU will be entitled to establish their tax representative
  • With regards to calculating the proportion for partial VAT deduction, the yearly turnover shall exclude auxiliary transactions regarding real estate and financial services
  • Finally, the obligation to issue internal invoices will be abolished.

The third part of these changes - those to come into force on 1 January 2014 focus on:

  • Linking the tax obligation, as a general rule, to the supply of goods / services
  • Redefining the taxable basis as "all that contains payment (eg offsetting liabilities) received or to be received" including any additional costs (package, transport, insurance)
  • Allowing for easier downward correction of output VAT
  • Linking the moment when the right to deduct input VAT is created, to the moment when a tax obligation is created on the supplier's side.

Your Taxand contacts for further queries are:
Roman Namysłowski
T. +48 22 324 59 00

Agata Rutkowska
T. +48 22 324 59 41

Taxand's Take

The amendments to Polish VAT law should be carefully analysed and taken into account by multinationals conducting business in Poland.

In particular, the rules to come into force on 1 April 2013 should affect multinationals located in Poland, especially those active in the area of international trade. Also, the entities without a seat or permanent place of business in Poland, but conducting some activities in the country, shall become acquainted with new rules (regarding necessity to issue VAT invoices with output VAT and, if applicable, establishing a VAT representative).

The third part of the amendments - including major changes in respect of invoicing - will affect all taxpayers, which should prepare to adapting accounting and settlement systems.

The majority of the proposed changes are aimed at adapting the Polish VAT law to rules stemming from the VAT Directive and judgments of the European Court of Justice (ECJ). Therefore, multinationals should, in general, find the new regulations to be closer to the EU-wide standard.

The final wording of the planned amendments is generally known, however, some changes may still be made. Multinationals should keep abreast of these updates to ensure compliance at all times.

Taxand's Take Author