Works on the amendment of the VAT Act are in progress
On the website of the Government Legislation Centre a long awaited proposal of the Act amending the VAT Act has been published. As may be concluded from the rationale for the Act, the legislator’s intention is first of all further sealing of the tax system. Below we present a short summary of the most important – in our subjective assessment – changes which are to be effective already as of 1 January 2017.
- Reverse charge mechanism
The catalogue of goods covered by reverse charge mechanism included in Annex 11 to the Act is to be extended – it is planned to make it applicable also to silver, gold unwrought, jewellery and other jeweller’s articles (of strictly defined parameters), as well as to processors.
What is, however, more important, reverse charge is also to cover certain transactions involving the provision of construction services (e.g. connected with the erection of residential buildings, dismantling and demolition of construction facilities, plaster or painting works). Detailed specification of such services will be included in Annex 14 to the Act. The legislator will, however, narrow the application of the reverse charge mechanism to transactions wherein the service provider acts as a subcontractor.
- Extension of time limit for tax refund
If additional verification is necessary to confirm the refund as reasonable, the head of the tax office will be able, by way of a decision, to extend the time limit for the tax refund until such verification has been completed, which may include: checking the settlements of the taxable person and other entities involved in the trading in goods and services covered by the taxable person’s settlements and checking whether such settlements comply with the actual progress of the transactions.
It will be more difficult for taxable persons to get the tax refunded within the shortest possible time limit of 25 days. The conditions laid down in the current wording of the VAT Act will be extended, the refund will be possible if:
- the amounts due under invoices documenting the acquisition and included in the tax return where the taxable person requests the refund have been paid via a bank account (or SKOK Credit Union) and the taxable person presents documents evidencing such payment,
- the total amount of the remaining purchase invoices, which have not been paid as indicated above, does not exceed PLN 15,000,
- the taxable person has been registered for 2 years as an active VAT payer, filed tax returns and settled the taxes in a timely manner (was not in arrears in excess of PLN 20,000),
- the amount of the tax to carry forward from the previous tax return does not excess PLN 3,000.
- Registration deposit
As a completely new solution, an obligation will be imposed on selected persons to submit the so called registration deposit before being registered for VAT purposes. Such obligation will be imposed by the head of the tax office making the registration e.g. in a situation where the registering person had tax arrears in excess of PLN 20,000 over the last two years, the entity making the registration was already once deregistered for VAT purposes, the entity issued “empty” invoices or was involved in tax fraud and abuse arrangements, or if the person filing the registration was convicted by a final and unappealable judgment for a fiscal crime. The tax authority will be also entitled to require a deposit from entities making use of the so called virtual offices. The deposit will be in the range of PLN 20,000 to PLN 200,000 (plus tax arrears, if any). Forms of the registration deposit will be the same as in the case of a guarantee deposit. The taxable person will have 3 months to submit the deposit. Deposit will be made for a period of 1 year, and it will be possible to get it back – together with interest.
- Joint and several liability of a representative
Joint and several liability is to be imposed on a representative registering a VAT taxable person for (certain) tax arrears of such newly registered taxable person, limited to tax arrears which originated in connection with transactions effected over the first 6 months of the registration as an active VAT payer. Liability of the representative will be limited to 10 times the average monthly remuneration from the last quarter (so at the moment it is PLN 40,190.80).
- Deletion from the register of VAT taxable persons
The tax authority will have the right to delete from the register of active VAT payers (and VAT-UE payers) among others entities which have suspended the conduct of business activity for a period in excess of 6 months, which have not filed a VAT return for a period of at least 6 consecutive months (or 2 quarters) or filed the so called “zero” returns, issued the so called “empty” invoices.
- Quarterly settlements
Quarterly settlements are to be liquidated for other than small taxable persons, provided that a possibility to file quarterly returns is to be excluded with respect to taxable persons commencing the performance of taxable transactions over the first 12 months of the registration, as well as taxable persons supplying goods covered by the institution of the joint and several liability (Annex 13 to the VAT Act), the total value of which in any month from the last 4 quarters was in excess of PLN 50,000. The change is applicable to taxable persons commencing the activity as of 1 January 2017.
- Electronic returns
General obligation to file returns by electronic way will apply as of 1 January 2018, however, already as of the beginning of 2017 such obligation will be imposed, among others, on taxable persons obligated to register as VAT-EU payers and taxable persons who are involved, as sellers or purchasers, in transactions settled under reverse charge mechanism pursuant to Article 17.7 and 17.8 of the VAT Act.
- Purchaser’s joint and several liability
The legislator envisages numerous changes as regards joint and several liability of purchasers of selected goods and guarantee deposits. Also Annex 13 to the Act will be modified – the mechanism of joint and several liability will cover also transactions involving certain electronic goods, i.e. HDD and SDD drives, as well as stretch foil.
- Tax sanctions for incorrect tax settlements
If tax liability has been understated or tax to be refunded or carried forward has been overstated, the controlling tax authority will not only specify proper amounts of the tax but will also impose a sanction of an additional tax liability amounting to 30% of the understated liability or the overstated excess of the input tax over output tax. An additional tax liability may be imposed also if no return has been filed and tax liability has not been ben paid. At the same time, the VAT Act will envisages situations wherein the above sanction will not be applicable – e.g. if the taxable person corrects the mistake by its own and pays a difference in tax or if the misconduct is committed by a natural person who is liable for fiscal offence or crime in connection with such act.
In specified situations – e.g. when the input tax has been overstated by accounting for invoices issued by a non-existing entity, the rate of an additional tax liability in its part relating to input tax from such document amounts to 100%.
- New limit of sales for exemption on total transaction value related basis
Pursuant to the current regulations, the exemption from VAT is available to taxable persons whose total sales in the previous tax year did not exceed the net amount of PLN 150,000. Starting as of 1 January 2017 this limit will be increased to PLN 200,000.
Proposal of the Act of 22 September 2016 has been at the moment provided for giving their onion to: the State Treasury Solicitors’ Office, the Polish Committee for Standardization, the Office of the Competition and Consumer Protection, and the Central Statistical Office of Poland.