Important changes in Polish VAT regulations

Mandatory split payment

The new regulations introduce the obligation to use the split payment mechanism for specified transactions between taxpayers (B2B). If the transaction involves goods or services listed in Annex 15 to the amended VAT Act and at the same time the value of the transaction is higher than PLN 15,000 (regardless of the number of payments), taxpayers will be obliged to use the split payment mechanism. The invoice documenting such a transaction should contain the information “mechanizm podzielonej płatności”("split payment mechanism”).  

Goods and services covered by the mandatory split payment mechanism are listed in the Annex
15 to the VAT Act and include among others: construction works, retail sale of parts for cars and motorcycles, fuel for driving cars, heating and lubricating oils, waste, scrap, recyclable materials or electronics (e.g. laptop consoles, hard drives, processors, telephones).

It should be remembered that if the split payment mechanism is used, the recipient of the transfer receives a part of the funds (VAT equivalent) on the so-called VAT account. Taxpayers are not entitled to freely dispose the funds accumulated on VAT account.

Failure to comply with the provisions of mandatory split payment mechanism results in sanctions for both the buyer and the supplier:

• If the supplier does not provide information on the invoice that the transaction is subject to the mandatory split payment mechanism, they may be required to pay 30% of the amount of tax indicated on the invoice. The sanction will not be applied if the buyer, despite the lack of information on the invoice, will make the payment using the split payment mechanism,
• A buyer, who fails to make payments under the split payment regime, may also be required to pay an additional 30% VAT liability resulting from the invoice. The sanction will not apply if the seller pays the entire tax resulting form VAT invoice to the tax office, despite the violation of obligation to use split payment by the buyer.

In addition, making a payment in violation of the mandatory split payment rules will prevent the buyer from qualifying such payment as tax deductible cost.

Additionally, the violation of the provisions on split payment may be subject to fine as tax criminal offense.

Bank account for foreign entities

The split payment mechanism applies also to entities not based in Poland. From 1st November 2019, foreign entities that purchase or sell goods or services subject to mandatory split payment will be required to have a bank account in a Polish bank.

Taxpayers without a registered office or permanent place of business in Poland will be entitled to obtain compensation in the form of reimbursement of incurred costs for operating bank accounts. Reimbursement will be possible up to the amount of costs resulting from the use of the bank account and VAT account for the purposes of the mandatory split payment mechanism.

New matrix of VAT rates

On 1^st November 2019 changes in VAT rates for e-books and e-press will come into force. VAT rates for e-books have been reduced from 23% to 5%, while for e-press from 23% to 8%. In addition, from 1^st April 2020, a new VAT rate system based on the Combined Nomenclature (CN) for goods and the Polish Classification of Products and Services (PKWiU 2015) for services will be applicable. The new regulations assume, as a rule, taxation of entire groups of similar goods and services with the same tax rate.

Binding VAT rate information (WIS)

From 1st  November  2019 binding rate information (WIS) will come into force. WIS will have a similar nature to individual tax rulings. The taxpayer will have the right to ask the Director of National Tax Information about the correct VAT rate for a good or service. WIS will determine the classification of a good or service according to the new matrix and the VAT rate. The received answer will provide protection similar to the protection granted on the basis of individual tax ruling. The issued WIS (after removing the identification data of the applicant) will be published and available on the Internet.

Author:

Adam Sękowski
Tax Manager
Crowe