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Modifications to VAT since 1 July 2015

2015-07-15

On 1 July 2015 next significant modifications to the Value Added Tax became effective. These modifications concern most of all an extension of the catalogue of goods subject to the reverse charge procedure and sensitive goods, an obligation of submission of summary statement in the domestic trade, and elimination of asymmetry in application of laws concerning bad debt relief by a creditor and a debtor, when the latter is undergoing bankruptcy proceedings and when both entities are bound by family, adoption, capital, financial or employment based relationship.

Reverse charge procedure

The first modification to laws concerns transactions to which the so-called reverse charge procedure applies, i.e. transaction of sale of goods from which VAT is settled by the buyer and not the seller.

Since 1 July 2015, this procedure has been applying exclusively to transactions where both the seller and the buyer are companies registered as active VAT taxpayers. As a consequence of this modification, buyers of goods subject to the reverse charge procedure which are not VAT-registered and exempt from this tax will be exempt from the obligation of settling this tax on their own, which will result in imposing the obligation of checking buyer’s VAT status on sellers in each case. The verification of status will be facilitated by an online database of VAT-registered entities available on the Tax Web Portal of the Ministry of Finance.

Furthermore, the catalogue of goods subject to the reverse charge procedure, listed in appendix no. 11 to the Act, was expanded. Ribbed metal sheet made of unalloyed steel, gold in the form of raw resource, intermediary product and investment gold, aluminium, lead, zinc, tin, nickel and electronic products, i.e. mobile phones, laptops and video game consoles, but only if their total value as part of an economically uniform transaction exceeds net 20,000 PLN, were among others added to the goods in the category of steel, brass, waste, secondary raw materials and scrap to which the procedure applies. An economically uniform transaction is an agreement which involves one or more deliveries of goods, orders or invoices, or more than one agreement if the circumstances or terms of this transaction differ from the circumstances or terms usually present in trade in electronics.

Starting from settlement for July, taxpayers carrying out sales subject to reverse charge will be also obliged to submit, within terms required for submission of VAT-7, VAT-7K or VAT-7D tax returns, summary statement with VAT-27 symbol, indicating all domestic buyers and the value of sales for them in a relevant settlement period.

Joint and several liability of purchaser of goods

The institution of tax liability of buyers for outstanding VAT tax of sellers of goods listed in appendix no. 13 to the VAT Act (the so-called sensitive goods), established in 2013, to date included certain steel products, engine petrol, diesel, heating and lubricating oils, gases for propulsion of combustion engines and unwrought gold or gold in the form of an intermediate product or a powder of purity of 0.325 or higher.

The modification made on 1 July involves formulating nine new categories of sensitive goods (among others printer toners, ink cartridges and printing head, unwrought silver or platinum or silver or platinum in the form of intermediate product or a powder, digital cameras), and exclusion of gold from among sensitive goods.

Buyers of sensitive goods may be exempt from joint and several liability by making a guarantee deposit. Since 1 July 2015, the amount of such deposit will differ depending on the type of goods delivered by taxpayers. In case of taxpayers delivering fuels, heating and lubricating oils, the minimum guarantee deposit will be raised to 1 million PLN and the maximum – to 10 million PLN. Moreover, taxpayers will be entitled to interest in the amount of 30% of the deposit rate of the National Bank of Poland from the sum of guarantee deposit made in the form of a cash deposit.

Adjustment of VAT from irrecoverable debts

The institution of the so-called bad debt relief, regulated by Art. 89a and 89b of the VAT Act, enables creditor to lower tax base and tax due in the event of the lack of payment from its contractor, and it obliges the latter to make an appropriate adjustment of deducted tax due. The laws effective from 1 July modify the previous rules of such adjustment in case of affiliates or debtors undergoing bankruptcy proceedings.

The first modification introduced a rule according to which debtors will be obliged to adjust calculated tax if on the last day of the month in which 150 days passed from due date, they will be undergoing bankruptcy proceedings or liquidation. Creditors, as previously, will not be entitled to make a relevant adjustment, as stipulated by Art. 89a.

Additionally, as Art. 89a(7) of the VAT Act was revoked, creditors affiliated with a debtor became entitled to benefit from bad debt relief, which was not possible in the past (when a debtor had to make such adjustment despite the affiliation). The existence of the aforementioned affiliation does not pose an obstacle in benefiting from bad debt relief by creditors anymore.

What is important, pursuant to the transitional provision, modifications to the institution of bad debt relief will also apply to debts occurred before 1 July, whose irrecoverableness was substantiated after 31 December 2012.