- The supply of e-books and audiobooks through Internet in the view of new VAT rates matrix
- Digital Tax in the European Union still without agreement
- Digital tax – Polish approach
- Harmonised chain transaction
1. The supply of e-books and audiobooks through Internet in the view of new VAT rates matrix
Introduced, new matrix of VAT rates was intended to facilitate the application of the rates of tax on goods and services, in particular to harmonize VAT rates for similar goods. Unfortunately Polish legislator did not managed to work out the precise rules for the application of VAT rates for all goods. Controversy arises with the settlement of proper VAT rate, which should be used for the supply of audio books downloaded from the Internet.
In the old version of the provision two tax rates were binding: 5% for standard, printed books and 23% for electronic books. In accordance with annex number 10 to the VAT act, preferential tax rate will apply to both printed books, publications in Braille and books issued on disks, tapes, and other media (items marked symbols ISBN).
The most troublesome issue is the taxation of audiobooks which are downloaded from Internet websites. Currently, administrative courts stress the strong difference which exists between electronic/ audio books which are distributed via media/drives and electronic books/ files that can be downloaded directly from the Internet.
In accordance with the opinion of the experts, the supply of downloaded audio books in the form of mp3 files will still use the standard rate of 23%. Most likely the Ministry of finance will issue on this explanation, regarding the most questionable issues.
We strongly encourage you to acknowledge brochure prepared by Advicero Tax Nexia specialists, in which the most important changes are described.
2. Digital Tax in the European Union still without agreement
In 2018 Western European countries were strongly motivated to impose new tax, which would affect the biggest companies in the e-commerce industry. The main goal of that idea is to tax income gained by those companies within the European Union. The European Commission wants to end the practices used by the largest parties – “digital giants”, which often use aggressive tax optimization and creative accounting, thereby avoiding tax, despite the derived, billion market in the countries of the Union. Among these giants often mentioned: Google, Facebook, Amazon, Spotify, Netflix or Tidal.
To the introduction of the new load, all governments of the Member States have to accept the proposed changes. However, the following states opt opposingly: Ireland, Sweden and Denmark. These are the States that due to the friendly tax laws, e-commerce companies usually show as their place of business the need for taxation in the EU. Currently, these countries effectively block the adoption of the new rules.
Therefore, individual countries which are in favor of the implementation of the new tax began to prepare their own, internal regulations in this regard. Tax on interest rate 3% has already been introduced in France, it will be applied to entities that annually gain in the global scale of at least 750 million euros of revenue with digital services. Poland also tends toward the adoption of the new rules.
Individual regulations placed on the legal systems of the individual Member States will contribute to the difficulties of preparing one, common to all EU countries, the draft law. Announced by the European Commission the changes would in effect since the beginning of the year 2021, and so in the near future should appear further comments regarding the introduction of new regulations.
3. Digital tax – Polish approach
Poland is of the countries that actively support the introduction of the tax. As previously announced, the Prime Minister of Poland is going to introduce a tax on “digital giants”. The Government – as explained in the press conference, understands the concept of “digital giants” as global companies that generate profits in Poland offering digital services understood as online advertising, VoD and streaming music. In accordance with the statement of the Prime Minister, the tax would be introduced in subsequent years.
The office of the prime minister reported that the planned tax may bring to the State budget around 1 billion dollars annually. The planned tax would be 3% (for now the details of the planned solutions are not known). Professional services return however, the attention to the fact that precise calculation is not possible, due to the inability to estimate revenues by the digital giants.
The new proposal was met with criticism of Internet users, who fear that the imposition of the tax on large, international actors will increase the price of subscriptions to streaming platforms and advertising.
4. Harmonised chain transactions
An important element of e-commerce is trade between countries of the European Union. Currently in force, different in each of the Member States provisions commonly resulted in a different tax treatment of the same transaction.
EU Council directive of 4 December 2018 is to harmonize the provisions which are currently binding. Changes will be implemented from 1 January 2020 and relate primarily to: functioning of the consignment stores (the so-called call-off stock), transactions, and the introduction of the obligation to provide the TIN in the intra-community acquisition of goods and substantive as intra-community supply of goods the condition for its recognition that there has been intra-Community transactions.
In the case of the best consignment stores changes to the current legislation in Poland is the introduction of the principle that the goods must be collected from the consignment warehouse by the recipient within 12 months from the date of their entry into the store (now Article 12a (4) of the law on VAT provides for longer, 24 month period). In addition, the consignment store will be able to be carried out by an entity other than the buyer of goods (the current provision of Article 12a (1) of section 3 of the VAT Act does not allow for the operation of consignment by others). Finally, the most advantageous change: goods will not have to be intended only for production activities or services, but also for other activities such as . This change may contribute to an increase in interest in consignment stores by wholesale trade, which until now could not take advantage of a great tax solutions (deferral of tax obligation).
Further changes introduced by the Directive and its implementation plans, we will keep you inform through our newsletter and on our blog, to which read You are welcome.