Changes in VAT as of 1 January 2017
The Act on the amendment of the Goods and Services Tax Act and certain other laws was published in the Journal of Laws no. 2024 of 15 December 2016. We informed about changes planned by this instrument of law in our September Newsletter. However, in view of the quite significant scope of the amendment, we would like to present briefly the most important changes in VAT.
An important change is the application of reverse charge mechanism to additional categories of goods and services. As of 1 January, the mechanism will also apply to, among others, construction services and construction related services. However, this rule will be applicable only where the service provider performs such services as a subcontractor. In addition, self-taxation by the purchaser will apply to the supply of, among others, silver, gold unwrought, jewellery and other jeweller’s articles (of strictly defined parameters), as well as to processors.
Detailed catalogue of services covered by reverse charge mechanism is included in Annex 14 to the VAT Act.
What important, those provisions will be applied to services listed in Annex 14 to the VAT Act performed starting as of 1 January 2017. For construction services completed by the end of 2016 the regulations prevailing to date are to be applied.
Input tax deduction
The right to deduct input tax in a transaction of intra-Community acquisition of goods has been made dependent on taking into account the amount of output tax disclosed in a return in which the taxable person is required to settle the tax, no later than within 3 months of the end of a month representing a tax point for the acquired goods. Taking output tax into account at a later date will affect the time limit for deducting input tax. In such case it will be settled “on an ongoing basis”.
The same principles for input tax deduction will apply to the provision of services for which the service recipient is the taxable person and to the supply of goods for which the purchaser is the taxable person.
Accelerated VAT refund
It will be more difficult for taxable persons to get the tax refunded within the shortest possible time limit of 25 days. Such refund will be possible if all of the following conditions have been satisfied jointly:
1) the amounts of input tax, disclosed in a tax return, arise from:
a) invoices documenting the amounts due which have been paid in full via a bank account of the taxable person in a bank having registered office in Poland or an account of the taxable person kept with a SKOK credit union of which the taxable person is a member, indicated in the identification return,
b) invoices other than listed in a) documenting the amounts due if their total amount does not exceed PLN 15,000,
c) customs documents which have been paid by the taxable person,
d) importation of goods settled under simplified procedure, intra-Community acquisition of goods, provision of services for which the purchaser is the taxable person, if the amount of output tax on such transactions has been disclosed in a tax return,
2) the amount of input tax or the excess of input tax over output tax not settled in previous settlement periods and disclosed in a tax return does not exceed PLN 3,000,
3) the taxable person submits to the tax office documents confirming that tax has been paid via his bank account or his account with a SKOK credit union,
4) over a period of consecutive 12 months preceding directly the period for which the application for refund within 25 days is made the taxable person:
a) has been registered as a VAT active payer,
b) has filed tax returns for each settlement period.
Right to refuse registration for VAT purposes and to delete a taxable person from VAT register
The head of a tax office will not register the entity as VAT taxable person (without the need to make relevant notification to the person) if e.g. data stated in the registration return are not true or the entity does not exist or it is not possible to contact the entity or its representative. The entity will be deleted from the VAT register also where the business activity has been suspended for at least 6 consecutive months, the so called “empty invoices” are issued or the so called “zero” tax returns are filed.
Quarterly VAT returns
As of 1 January 2017, other than small VAT taxable persons lose the right to file quarterly VAT returns. At the same time small taxable persons will not have the right to file quarterly returns in a period of 12 months of their registration as well as taxable persons supplying goods covered by joint and several liability with their purchaser.
VAT returns filed by electronic way
As of 1 January 2017, a certain group of taxable persons, among others those registered as VAT EU payers or supplying goods or services for which the purchaser is the taxable person, are required to file returns via electronic means. For other taxable persons, the obligations to file returns in electronic form will apply as of 1 January 2018.
Purchaser’s liability for tax on the acquisition of sensitive goods
Amended is Annex 13 to the VAT Act, and namely a list of goods for which the legislator has implemented joint and several liability of the purchaser with the supplier for his tax arrears. The provisions excluding joint and several liability of the purchaser and the conditions authorising the supplier of sensitive goods to provide a guarantee deposit have been also modified.
Additional tax liability
The amendment has put a new chapter to the VAT Act specifying the principles for assessment of an additional tax liability.
In the event that no tax return has been filed and the amount of tax liability has not been paid, as well as where the tax return filed discloses the amount of liability in incorrect amount or there is other misstatement in the amount of VAT disclosed to be refunded or carried over to the next settlement period, the tax authority will specify incorrect taxes in proper amounts and will assess additional tax liability equal to 30% of the understated tax liability or the overstated tax refund or carry over.
The provisions also indicate when such additional liability will not be assessed and when the additional sanction will be equal to 20% or even 100% (e.g. if VAT is deducted from the so called empty invoice, i.e. an invoice which does not document an actual business transaction).
The provisions on additional tax liability will apply to settlement periods falling after 1 January 2017.
Exemption from VAT on total turnover basis – new limit of sales
As of 1 January 2017, the limit of sales authorising to enjoy the exemption from VAT on total turnover basis has been raised to PLN 200,000. However, pursuant to interim provisions, taxable persons whose sales value in 2016 was higher than PLN 150,000 and did not exceed PLN 200,000 may chose the exemption from VAT in 2017.
The Act enters into force as of 1 January 2017.