- New withholding tax obligations
- Tax schemes – reporting obligations
- White list of VAT taxpayers and other important changes in the list of taxpayers kept by the Head of KAS
- On-line cash registers
- Simplified advance pricing agreements still at working stage
- Travel expenses for clients are representation costs – the judgment of WSA
1. New withholding tax obligations
The amended regulations imposing additional documentation obligations with respect to withholding tax (WHT) will come into force on July 1st, 2019. The existing regulations concerning WHT oblige Polish companies making payments to foreign entities to collect lump-sum income tax. The rate depends on the type of payment made (as a rule 19% or 20%). The Acts on income tax provide for the possibility to apply lower rate or exemption if the payer holds a certificate of residence, confirming the country of registration of the recipient. In addition, other documents may also be required to apply a lower rate or exemption.
A significant change, which will come into force on July 1st, 2019, is the introduction of an additional documentation obligation for payments executed to one entity during one tax year, with total value exceeding PLN 2 million. Failure to comply with the introduced regulations will automatically result in the need to remit WHT calculated using the 20% rate.
In particular, as an additional obligation for the payer, he shall be obliged to submit a statement on having the necessary documentation confirming the WHT exemption or authorizing to apply regulations resulting from double taxation treaties. It is worth noting that the said statement may not be made later than on the date of payment of the amount due. The statements will only be valid for a limited period of time, so the subsequent payments may cause a new information requirement.
In the statement, the taxpayer should additionally assure the tax authority that he does not have any information preventing him from taking advantage of preferential tax rules. What is also important, the obligation to exercise due diligence when verifying the possibility of applying an exemption or reduction of the tax rate was introduced (from the beginning of 2019).
Despite the extended deadline for these changes (July 1st, 2019 instead of the initially planned January 1st, 2019), many companies are still not prepared to have the required additional documentation. Advicero Nexia specialists can support you in preparing appropriate and tailored to individual needs statements.
2. Tax schemes – reporting obligations
From January 1st, 2019, there are new regulations in force that require reporting of so-called tax schemes, as regards cross-border and domestic transactions. It is worth noting that the regulations in question were introduced on the basis of the EU directive (the so-called ATAD directive), but in a broader scope and earlier dates than the one resulting from the directive. The most important difference between the EU directive and the regulations in force in Poland is the obligation to report national schemes as well.
The condition for the obligation to report the national scheme is to meet the criterion of the so-called qualified user (determined on the basis of value of revenues, costs, market value of the item to be agreed, being related to other entities). Reporting obligations apply to entities providing, supporting implementation or profiting from tax schemes. It is worth remembering that the law provides for high fines for failure to report schemes or non-use of internal procedures in the area of counteracting non-meeting the obligation to provide information on tax schemes. According to the regulations, a promoter who fails to comply with the reporting obligation will be subject to a fine of up to approx. PLN 20 million. Penalty may also be imposed on entities employing promoters or paying remuneration to promoters who have not implemented the appropriate procedure, in the amount of PLN 2 million. Feel free to contact us if you are interested in the above topic – we assist our clients in the implementation of appropriate procedures and performance of reporting obligations.
3. White list of VAT taxpayers and other important changes in the list of taxpayers kept by the Head of KAS
In March 2019 the Council of Ministers adopted and submitted to the Parliament an important draft of amendments to the VAT Act and some other acts. The changes provided for in the draft will have a practical application in the daily business of taxpayers aiming to maintain due diligence procedures in handling VAT transactions.
The draft provides for the introduction of so called “a white list of VAT taxpayers”, top be kept by the Head of the National Tax Administration (KAS), i.e. an updated daily list of active taxpayers, with simultaneous access to a 5-year history of changes in the status of the entities listed therein. The new list will solve a significant current issue of taxpayers – they will be able to determine the status of a taxpayer as at the date of transaction execution, and not as at the date of preparation of the VAT return. So far, the lists available to the public contained only the current state of affairs in three separate databases.
The draft also provides for a new obligation for taxpayers to verify whether the bank account to be used for invoice payment is known by the tax administration. The Head of KAS will include the known accounts in the list of taxpayers kept in accordance with the new regulations. Making a payment to an unknown bank account, not disclosed on the list, will result in restrictions for the purchaser in recognising the expense as a tax deductible cost. The new rules are to apply from September 1st, 2019. On the one hand, they will facilitate the work of accountants by simplifying the activities of verifying the status of a VAT taxpayer, but on the other hand, they will significantly increase the business risk of making payments, imposing new obligations on taxpayers.
4. On-line cash registers
As of May 1st, 2019, new regulations concerning fiscal cash registers are in force, as introduced by the law amending the VAT Act and the Metrology Act: https://www.prezydent.pl/prawo/ustawy/podpisane/art,44,kwiecien-2019-r.html
Pursuant to the new regulations, from January 2020 a new type of fiscal cash registers will be introduced in Poland, i.e. on-line registers, which will transfer on-line sales data to the servers of the Ministry of Finance. Ultimately, all the fiscal devices currently used in retail sales, including those with copies of receipts on paper and those with electronic fiscal module, will be replaced by a new technical solution in which a copy of the issued receipt will be sent directly to KAS via the Internet in a continuous and automated method.
The obligation to use new fiscal cash registers will be introduced in stages, starting with those industries in which, according to the assessment of MF, irregularities occur most frequently consisting in omitting the registration of sales on a fiscal device. The first group, whose representatives will have to use new equipment from January 1st, 2020, includes, for example, motor vehicle and moped repair services, including tyre repairs, sales of motor gasoline, diesel oil and gas for internal combustion engines.
Previously used devices – in industries not subject to the accelerated replacement obligation – will continue to be used unless they are damaged or their fiscal memory is full. Then the taxpayer will be provided with a new device capable of transmitting retail sales data online, because ultimately only such devices will be available for purchase.
The new regulations are of great importance for all entrepreneurs carrying out retail sales, a novelty will be the need to ensure Internet access at all points of sale.
5. Simplified advance pricing agreements still at working stage
In March 2019, the government published a draft law on resolving double taxation disputes and concluding advance pricing agreements (APAs): https://legislacja.rcl.gov.pl/projekt/12321385/katalog/12578017#12578017
According to the draft, a simplified advance pricing agreement can be applied in specific cases:
- purchases of low value-added services,
- payment for the use of, or the right to use, a trademark or knowledge (information) related to the experience acquired, suitable for use in industrial, commercial, scientific or organisational activities (know-how).
The simplified agreement procedure is intended to cover, i.a.
- limited information required in the application, focusing on transaction specificities,
- the possibility of making statements instead of presenting detailed documents,
- the possibility to change applications for a simplified advance pricing agreement into applications for a regular APA (where no simplified pricing agreement can be issued) and vice versa.
The simplified agreement is to be issued for a period of 3 years with the possibility of extension for further periods of 3 years if the elements of the agreement are not substantially altered. The application fee is to be fixed at a flat rate of PLN 20,000.
The draft law is still in the consultation process. We will keep you informed about changes in the works status.
6. Travel expenses for clients are representation costs – the judgment of WSA
In the published justification for the judgment of the Provincial Administrative Court (WSA) in Gdansk of February 26th, 2019, case ref. I SA/Gd 1068/18, the court upheld the position of the tax authority, which recognised the expenses related to foreign trips of car showroom customers, organized to the car factory and brand museum, as representation costs, not included in the tax costs.
The taxpayer running a car showroom requested an individual interpretation on the possibility of including the costs of organising meetings with current or potential customers as tax deductible costs. As the taxpayer pointed out, such meetings take a variety of forms, such as the presentation of a new car model, events on a car track, training in driving technique or a visit to a German factory of cars sold by the taxpayer, combined with a visit to a brand museum.
The tax office considered the taxpayer’s position to be incorrect in the part relating to the organisation of training and foreign trips to the car factory and visiting the brand museum. The WSA in Gdansk upheld this position by stating that those events were pure representative. As the court justified, by organizing such events, a taxpayer creates his image, creates among selected contractors the impression of a professional entity, a trustworthy business partner, shapes the prestige and positive perception of his company by customers.
As the court explained, although the representation, like advertising, is intended to promote an economic entity, both representation or advertising does so in a different way. Advertising is about presenting commodities, inducing to purchase goods in a direct way, and representation indirectly promotes the economic entity by creating a good image of the company.