- New matrix of VAT rates – from 1st of July, 2020
- ATAD II implementation approved
- An invoice is sufficient to deduct VAT – the basis for resuming the proceedings and a helpful argument in the carousel case
- Exemption from the minimum tax – solution of Shield Anti-Crisis 4.0
- Postponing the new SAF-T (JPK_VAT file) – time to clarify doubts
- Application of split payment mechanism when settling payments through offsetting. Obligation to put annotation ‘split payment mechanism’ on invoices issued
- The remuneration for using a trademark included in the price of goods purchased by the company is subject to withholding tax in Poland
1. New matrix of VAT rates – from 1st of July, 2020
On 1st of July, 2020, the new VAT rate matrix entered into force. The new matrix was to be used from 1st of April, 2020, however its date was postponed to 1st of July this year. The new changes are aimed at simplifying and standardizing the rate system for a similar category of goods or services.
The Binding Rate Information system (WIS) is to improve the identification of rates, thanks to which every taxpayer will be able to obtain information on the correct assignment of rates.
Examples of changes relate to e.g. harmonization of the rate of 5% in the case of tropical and citrus fruits, as well as the same rate is taxed for all types of bread, regardless of the type and date of consumption and cookies. The lower VAT rate also applies to homogenised and dietary foods, as well as soups and broths, some nuts, e.g. almonds and pistachios, some unprocessed spices, e.g. pepper, nutmeg, as well as products for babies and children, as well as books.
Increase in rates for products such as: firewood, seafood, e.g. lobster, octopus and other crustaceans, molluscs and aquatic invertebrates, e.g. crabs, crawfish, shrimps, oysters, mussels, snails and preparations made from them, e.g. caviar and caviar substitutes, as well as meals sold in various catering establishments, which include these products. The increase in the rate also applies to ice used for food and refrigeration.
The 8% tax rate will remain in force for medical devices, medicinal products, disinfectants, water treatment and supply services for residents as well as services related to culture, sport and recreation, passenger transport, maintenance works.
Therefore, the necessary modifications should be made to record sales using cash registers, and a new classification number should be set. If in doubt, apply to the Director of National Tax Information for Binding Rate Information. This instrument allows you to verify the statistical position (and rate if applicable) regarding any VAT provisions that refer to statistical items: CN, PKWiU from 2008 and 2015, PKOB – so not only in relation to tax rates. In addition to setting rates applicable from 1 July 2020, WIS should also be requested by taxpayers who buy or sell goods and services covered by obligatory split payment. From October 1, 2020, they will have to classify these benefits in JPK VDEK under pain of not only the mandate, but also of criminal liability for providing untruth in the declaration. Therefore, paying all invoices in spilt payment will not solve this problem, because unfortunately you have to show only compulsory split payments in JPK VDEK.
2. ATAD II implementation approved
Government bill amending the act on corporate income tax, act on tax on goods and services, act on the exchange of tax information with other countries and some other acts finally signed by the president (Dz.U. 2020 poz. 1106). It is a sealing package that implements the assumptions of Council of European Union Directive 2017/852 and the ATAD II Directive.
This amendment applies to three areas. First of all, it is counteracting discrepancies in the qualifications of hybrid structures, and secondly, it simplifies VAT in cross-border trade and changes in tax patterns regarding cross-border arrangements and their automatic exchange with countries.
In the Corporate Income Tax Act, a new Chapter 3a strictly related to hybrid structures has been added. These are structures that in their jurisdiction are based on their non-transparency, while in others they are tax transparent. The Polish implementation focused mainly on the unjustified double counting of the same costs in different countries as tax deductible costs.
The VAT Act clarifies the issues of consignment warehouses (call-off stock), which are not considered as intra-Community supply. More and more is required to obtain a 0% rate at the so-called chain transactions.
The third area of changes is the new obligations in reporting cross-border tax schemes. Earlier unique numbers will be annulled and will have to be re-submitted. The whole embarrassment is caused by the incompatibility of the Polish version of the schema with the EU one. The simplifications can certainly mention the possibility of signing the reported scheme by persons designated to represent the company, not all members of the management board have to do so as before.
3. An invoice is sufficient to deduct VAT – the basis for resuming the proceedings and a helpful argument in the carousel case
On June 4, 2020, the EU Court of Justice issued a judgment which is very favorable to VAT taxpayers (reference number C-430/19), in which it confirmed the right to deduct VAT only on the basis of an invoice, without the obligation to possess other documents confirming the reality of the transaction or the need to verify contractor in terms of possible tax offense.
The CJEU ruled that the taxpayer concerned by the decision may exercise the right to deduct VAT and reminded that this is the basic right on which the Community VAT system is based. The CJEU emphasized that combating tax fraud is also an important goal of the European Union and national authorities have the right to refuse the right to deduct tax if there is objective evidence and it is shown that this right is the result of fraud or abuse, as the taxpayer knew or should have known as a participant of a transaction.
Importantly, the CJEU has once again confirmed that the taxpayer who is the recipient of the invoice is not obliged to determine whether the transaction involved VAT fraud – there is no obligation to examine whether the invoice issuer possesses the goods, has the ability to deliver them or submits tax returns. According to the CJEU, it is for the national court to determine the objective evidence as to whether a tax fraud took place in specific cases, since EU law does not provide for rules on how evidence is to be taken in cases of VAT fraud – although at the same time the Court has clearly indicated that the authorities cannot pass on the burden of proving the transaction to the taxpayer. In other words, if the authority questions the invoices, it should provide specific evidence in this respect and not require the taxpayer to provide additional evidence regarding the transaction, in addition in good faith.
Such a ruling is good news for taxpayers and is a favorable interpretation of law for them, helpful for use in pending cases regarding the so-called tax carousel. The authorities often ask in such cases for evidence other than the invoice – and shift the burden of proving irregularities regarding their claims to the taxpayers.
On the other hand, in completed proceedings, in which the way of command criticized by the CJEU was used, this judgment will constitute the basis for resumption of tax or administrative court proceedings – after the official publication.
For now, the Tribunal’s judgment has the form of a temporary edition and is not officially published in the Journal of Laws.
4. Exemption from the minimum tax – solution of Shield Anti-Crisis 4.0
In order to support entrepreneurs, an exemption from tax on revenues from commercial buildings was introduced (the so-called minimum tax) for the period from 1st March 2020 to 31st December 2020 (Article 52pa of the PIT Act and Article 38ha of the Act on CIT).
The previous solution, which was in force due to the entry into force of Shield 1.0. it only postponing the deadline for paying the minimum tax for the months from March to May 2020 to 20 July 2020. In addition, the taxpayer had to meet the following conditions: it suffered negative effects due to COVID-19 and its revenues dropped significantly. Current Shield 4.0 exempts from the minimum tax from March to December 2020 with no additional requirements. Therefore, the minimum tax is payable only for the months of January and February. However, if the entrepreneur has paid the minimum tax for the months from March to May, then due to the introduced regulations, it is possible to obtain a refund of the tax paid. In addition, it should be noted that the Shield 4.0. does not indicate any regulations regarding the refund of this tax, and Article 24b paragraph 15 of the CIT Act does not apply.
Such a solution may constitute additional cash for entrepreneurs who own the property of such shopping malls, hotels or warehouses and to a large extent feel the effects of the COVID-19 epidemic.
5. Postponing the new SAF-T (JPK_VAT file) – time to clarify doubts
Shield 4.0 postponed the obligation to submit the new SAF-T files together with a VAT declaration to 1st October 2020. This change applies to all taxpayers.
According to the Ministry of Finance, this change was dictated by the entrepreneurs’ requests, due to significant difficulties in reporting in the period of the epidemic. Postponing the reporting deadline according to the new SAF-T gives taxpayers time to determine the correct identification of goods and services according to specially assigned codes. As indicated in the Regulation of the Minister of Finance, Investment and Development on the detailed scope of data contained in tax declarations and in the records of the tax on goods and services, the record should include indications regarding the delivery of such goods as alcoholic beverages, heating oils and lubricating oils or tobacco products in the understanding of the provisions on excise duty. In connection with this, doubts may arise as to the reporting of excise goods in the new SAF-T, which due to excise tax regulations are exempt from excise duty, while in the new SAF-T they would be classified as excise goods. Similar doubts may arise in the case of a reverse charge mechanism, where the buyer becomes the taxpayer and is obliged to settle VAT. These issues can be resolved when by applying for Binding VAT Rate Statement (BRS) or Binding Excise Information (BEI) is requested.
In addition, it should be borne in mind that in the event of failure to provide reporting data in the new SAF-T file, the taxpayer may be punished with a fine of PLN 500 for each error in the new SAF-T that will prevent verification of the correctness of transactions and may also bear criminal and tax liability. That is why it is worth using this extra time to avoid mistakes in the new SAF-T.
6. Application of split payment mechanism when settling payments through offsetting. Obligation to put annotation ‘split payment mechanism’ on invoices issued
On May 27, 2020, the Director of the National Tax Information issued an individual interpretation regarding the application of split payment mechanism in the situation of payment settlement through offsetting and the obligation to place the annotation “split payment mechanism” on issued invoices.
The applying Company settles with its contractors through offsetting in order to streamline processes and improve financial liquidity. For this reason, it uses the services of a Coordinator of multilateral deduction who settles mutual receivables of the Company and its contractors. Part of the goods and services that are the subject of the transaction is listed in Annex 15 to the VAT Act, which means that from November 1, 2019, it is subject to obligatory split payment mechanism.
According to the Applicant, the use of offsetting releases from the obligation to pay using split payment mechanism. Applicant motivates his stand by saying that the transfer resulting from the netting balance, that the Company makes to the Coordinator or which the Coordinator makes to the Company, is not a payment for any specific invoice.
The authority did not accede to the above justification, because in its opinion, pursuant to art. 108a paragraph 1a of the VAT Act, when making payments for purchased goods or services listed in Annex 15 to the Act, documented by an invoice on which the total amount of the receivable is more than PLN 15,000, taxpayers are obliged to apply the split payment mechanism.
In the discussed case, the provision of art. 108a paragraph 1d of the Act cited by the Applicant, will not apply. Excluding the application of split payment mechanism on the basis of the above the provision applies only to the compensation referred to in art. 498 of the Civil Code, when two persons are both debtors and creditors to each other.
In the presented circumstances, there are multilateral deductions of receivables from other entities belonging to the Group, as well as receivables of these entities towards the Company.
The Applicant’s position was considered incorrect.
The second question concerned the obligation to place the annotation ‘split payment mechanism’ on the invoice issued. According to the Applicant, there is such an obligation, since the provisions on the use of the split payment mechanism do not provide for exceptions to the principle that the mechanism covers invoices that meet the above-mentioned conditions. This stand was confirmed by the tax authority. Moreover, multilateral (contractual) compensations do not fulfill the obligations related to payment subject to obligatory split payment mechanism.
The interpretation is clearly incorrect, because technically there is even no way to apply split payment mechanism in such a situation. However, what is more important, is the tax authority’s approach to the issue of mandatory split payment, aimed at including as many transactions as possible (or impossible). It is imperative that the applicant appeals to the court.
7. The remuneration for using a trademark included in the price of goods purchased by the company is subject to withholding tax in Poland
The Administrative Court in Warsaw confirmed (reference number III SA/Wa 1424/19): the remuneration for the use of a trademark included in the price of goods is subject to WHT tax in Poland.
In February 2019, the Director of the National Tax Information received a request to consider the above issue. A company operating in the cosmetics industry and is subject to unlimited tax liability in Poland. The applicant buys goods from a company in Switzerland based in Luxembourg. The company purchased goods from a contractor. The agreement governing the principles of cooperation contained a provision that 3% of the price of the goods purchased by the Applicant constitutes a remuneration for the buyer’s right to use trademarks for the purposes of promotion, advertising and sale of these goods. There are no connections between the entities that would allow for dismissal in this matter.
According to the above facts, the question was asked whether the use of the trademark would be subject to WHT tax. The applicant considered that such a benefit was mixed and should not pay tax on it. The director disagreed with this approach and considered the position incorrect. Such receivables are included in the catalog of royalties.
The company filed a complaint about the tax interpretation with the court alleging misinterpretation. She also referred to the OECD Model Convention commentary and economic, functional and economic separateness, which unfortunately (and controversial) the court disagreed with, stating that the fee for the right to use the trademark is a license fee within the meaning of Art. 21 paragraph 1 of the Corporate Income Tax Act. However, this judgment is not final and has probably been appealed to the Supreme Administrative Court.