Poland – ‘The Polish New Deal’
The Polish Ministry of Finance intensively works on changes concerning VAT taxation. In July 2021 the draft amendment to the Polish tax regulations so-called “the Polish New Deal”, including also changes in the VAT Act was published. New VAT regulations are going to be implemented to the domestic tax system from January 1, 2022.
Please find below VAT changes that may be interesting and important from a business perspective in Poland.
According to the article 11 of the EU VAT Directive 2006/112/WE, Poland is going to implement a VAT Group institution.
Pursuant to the regulations currently in force in the Polish legal order, taxpayers related financially, economically, and organizationally are settled for VAT purposes separately. The change will allow for joint VAT settlement by several affiliated taxpayers under the so-called VAT groups. The solution is voluntary, allowing companies to decide independently.
The VAT Group will significantly simplify the settlements between its members (out of scope VAT) and brings administrative benefits as well as increases the financial efficiency of cooperation with other entities from the group.
In consequence, the change will have a positive impact to the competitiveness of the Polish tax system. Taxpayers will gain tax planning opportunities, just like their competitors from other 18 EU Member States where the VAT Group is already implemented.
Tax Agreement and change in the Binding Rate Information
Introducing the new institution of the Tax Agreement so-called (PI), which will be a specific agreement between the investor and the Polish tax authorities regarding the tax consequences of investments in Poland. The Tax Agreement will be some kind of a complex tax ruling, which will ensure a uniform approach for interested entities. The contract will include information such as the description and classification of goods or services along with an indication of the appropriate VAT rate. The same entity will not be able to apply for a Binding Rate Information if the goods or services and VAT rate are specified in the Tax Agreement.
Introducing an option of VAT taxation of financial services
It will give a possibility to choose a taxation of financial services in business-to-business transactions between VAT taxpayers. Financial services provided to retail clients (non-taxable persons) will continue to be obligatorily exempt from VAT.
The option to tax financial services will ensure greater VAT neutrality in the financial sector. The currently applied VAT exemption means that the input tax related to the provision of these services is, in principle, not deductible for the providers. Taxation of financial services will give providers of these services the right to deduct input tax on purchases related to the provision of these services. The same right to deduct input tax will be applicable for the purchasers if the purchased services are connecting with the VAT taxable business activity.
A new VAT refund deadline – 15 days
The assumption of the change is to popularize non-cash transactions to tax benefits for entities using mostly non-cash payments. The tax preference would shorten the deadline for VAT refund to 15 days. In general, to take advantage of the “quick VAT refund”, the taxpayer should have a non-cash payment share non-less than 80%. The other requirement will need to be also met. Cashless payments are defined as payments made with the use of payment instruments, such as a card, a mobile payment, or a transfer order.