Poland’s VAT compliance landscape is highly dynamic. In the last few years, the Polish government has implemented a wide variety of VAT reforms, with the main objective of making the Polish VAT system more fraud-proof. Let’s take a look at some of the recent and upcoming changes that have had a great impact on business processes and systems.
2019 was a busy year for companies doing business in Poland. In September, the white list of VAT payers went live. If a company makes a payment for certain goods or services, it should check whether the bank account number of the supplier is included in the list. Payments to unlisted accounts may result in negative consequences for both VAT and corporate income tax purposes. In November, the mandatory split payment took effect for certain B2B supplies. Although initially surrounded by a lot of uncertainty (e.g. are credit card payments allowed for in-scope transactions or not?), the Finance Ministry offered businesses a Christmas gift by publishing explanatory notes on 23 December. This 23-page document clarifies some of the open questions that VAT payers were confronted with.
In 2020, more VAT changes have taken place in Poland. In July 2020, the VAT rates for a number of products were amended. These changes, commonly referred to as the New Matrix of VAT Rates (nowa matryca stawek VAT), seek to align the VAT treatment of similar goods and make the Polish VAT rate structure more transparent and simpler. The new list of goods and services subject to the reduced VAT rate is no longer based on the Polish Classification of Goods and Services (PKWiU) codes of 2008, but on the Combined Nomenclature (CN) - for goods and the current PKWiU of 2015 - for services. Initially, the New Matrix of VAT Rates was supposed to apply as from April; however, the government has decided to defer the effective date until July as part of its corona virus-related tax relief.
But perhaps the biggest change of 2020 will be the merging of the VAT return and the JPK file (a list of all sales and purchase transactions) into one report (JPK V7M - for monthly reporting and JPK V7K - for quarterly reporting). This development, frequently labelled in the popular media as “the death of the VAT return”, officially seeks to make life easier for businesses as they will be allowed to submit one report instead of two. The initial expectation was that the new JPK files will combine the data from the VAT return and the currently applicable JPK file. However, it turned out that this will not be the case at all. The new JPK report will require some additional data to be provided. Companies will have to assign special GTU (grupy towarowo-usługowe) codes to goods and services and add special abbreviations for certain transaction and invoice types. For example:
- GTU 01 – alcohol beverages;
- GTU 06 – electronic equipment;
- TP – transactions between related parties;
- TL – supply of goods in a chain transaction;
- MPP – invoice subject to split payment;
- FU - simplified invoice;
There will be transactions not covered by any special code or abbreviation (e.g. the supply of milk) but also transactions to which multiple codes will apply (e.g. sale of computers - GTU 06 and MPP). Taxpayers should check whether their ERP systems have been adapted to the new requirements and are able to apply the new designations automatically. The new JPK reporting requirement was supposed to apply to large businesses as from 1 April and to all other VAT payers as from 1 July. However, the Polish government has postponed the effective date for the new JPK until 1 October 2020 for all taxpayers as part of its tax relief measures to help businesses affected by the corona virus crisis.
Finally, there is also some good news for companies doing business in Poland. As from 1 November 2019, companies may apply for binding VAT rate information (Wiążąca Informacja Stawkowa, WIS) if they are not sure about the correct classification of their goods and services for VAT purposes. As the WIS will be provided on the basis of the new VAT rate structure, taxpayers may relay upon it as from 1 July 2020. Every product or service will need a separate WIS request. The request should contain information about the applicant (and his tax representative) and a description of the goods or services, allowing their classification according to CN or PKWiU. Additional information that will help make the classification decision (e.g. photos, instructions) can be attached. WIS rulings will be issued within three months after a payment of a fee amounting to PLN 40. The Polish tax administration has made available a database where all WIS rulings are published. A WIS ruling will cease to be valid if the taxpayer provided incorrect information in his ruling application or if the VAT law on which the ruling is based has changed.
The WIS is a welcome development in Poland: as all WIS rulings are binding on the tax administration, the recipients of WIS rulings will benefit from extra protection during tax audits. Moreover, any other taxpayer supplying goods or services covered by a WIS will also be able to take advantage of such a protection.
Next year more changes are on the horizon. On 18 August 2020, the Finance Ministry presented a bill to implement the SLIM (simple local and modern) VAT system. The bill is now subject to parliamentary consideration and, if enacted, will enter into force on 1 January 2021. Poland is also looking to implement e-invoicing in B2B transactions (similar to the Italian invoice clearance model) in 2022. I will cover these developments is a subsequent article.