New VAT rate matrix
By the Act of August 9, 2019 published in the Journal of Laws No. 1751, amendments were introduced to the Act on Tax on Goods and Services. One of the most interesting and most important changes, from the taxpayer’s point of view, is indisputably the introduction of a new VAT rate matrix. Its main purpose is to organize and unify currently existing regulations which have repeatedly caused businesses interpretation difficulties. The amendment may require the adjustment of tax rates for some goods.
A key modification is the transition from the old Polish Classification of Goods and Services (PKWiU 2008) to the appropriate Combined Nomenclature codes – for goods – and the adequate symbols of the newer PKWiU 2015 classification – for services. Moreover, the simplified matrix shifts from a detailed classification a slightly more general one and combines many categories of goods that have until now fallen into separate subgroups.
Under the current legal system, similar products have frequently been taxed at different tax rates. The most prominent examples of the legislator’s inconsistency have been provided by bread and bakery products, which are taxed at all applicable rates, depending on their expiry dates. The new regulations are intended to prevent this kind of differentiation. In this case, the baking rate has been standardized at a single 5% rate.
Wherever it was necessary to change the rate, the “level-down” principle was used. A reduction of the rate from 8% to 5% is provided, among others for tropical and citrus fruits, all types of bread and cakes, food for infants and young children, and all types of books in all formats (whether printed or electronic). In a small number of cases, the VAT rate will increase.
Binding Rate Information (BRI) will provide a tool enable taxpayers to make sure that they apply the correct tax rate and afford protection in this respect. In the current legislative context, in case of any doubts, taxpayers can only turn to the Central Statistical Office for a classification opinion, which, however, is not binding and does not protect the taxpayer in the event of a dispute with the tax authorities. The Binding Rate Information identifying the VAT rate for a particular product or service will take the form of an administrative decision. The rate set out in the decision obtained after submitting a correct application for a BRI cannot be questioned by the tax authorities.
The new regulations may enable the creation of a more transparent system of tax rates. Correctly implemented, they should also prove a significant simplification in undertaking and conducting business activities.
The amendment will come fully into force at the beginning of April 2020. However, it is worth evaluating it even now in terms of potential benefits your company can obtain from it. From then on, the BRI will also be binding on the tax authorities; however, applications for their issuance can first be filed on November 1, 2019.
Kinga Duszna, Tax Consultant, ATA Tax Sp. z o.o.
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