The provisions of SLIMVAT 3 – the next release of the VAT changes package – are now in force. Most of the tax changes provided for in the SLIMVAT 3 package came into effect on 1 July 2023.
In this post, we look at the most important VAT changes for international trade.
VAT deduction on intra-Community acquisitions without an invoice
Making an intra-Community acquisition of goods creates an obligation for a buyer to settle VAT due on this transaction. At the same time, he may deduct input tax. Consequently, the transaction should be tax neutral for the taxpayer.
The Polish VAT law allows input tax to be deducted only if an invoice is in possession. If there was a delay in the submission of an invoice (which is often the case in international trade), taxpayers had to delay or completely lose the possibility to tax deduct. The legislator in SLIMVAT 3 now drops the requirement to have an invoice for the deduction.
Reporting period for an intra-Community supply
SLIMVAT 3 changes the time of reporting an intra-Community supply of goods at a 0% rate in return adjustments – in the case of late receipt of documents, the transaction will be reported on the date on which the tax liability accrues, instead of the date on which the supply was made.
Foreign currency exchange rate rules for correcting invoices
Another part of the simplification is the regulation of the exchange rates to be applied to correcting invoices. Until now, the use of the correct exchange rates resulted from practice and case law. SLIMVAT 3 introduced the following rules:
- corrective invoices in plus/in minus – the rate adopted for the original invoice;
- summary corrective invoices in minus (discount or price reduction) – the average exchange rate on the last working day preceding the day on which the corrective invoice was issued.
Sales limit for small taxpayers
SLIMVAT increases the sales limit for the so-called small taxpayer from EUR 1,200,000 to EUR 2,000,000 per year. This will allow more taxpayers to, among other things, use quarterly settlements and the cash accounting method. The small taxpayer limit will become equal to the small taxpayer limit applicable to income taxes.
Reduced VAT sanctions
SLIMVAT relieves sanctions for incorrect VAT settlements. Previously, the authority could impose sanctions of 30%, 20% or 15% of the amount of the understated tax, respectively. These rates were set up as ‘fixed’ without the possibility of adjusting their amount to a particular case.
The legislator has added the possibility to moderate the sanction applied, depending on the circumstances of the specific case. The authority will no longer be able to apply the sanction automatically, it will have to motivate both the reasonableness of the sanction and the determination of its amount.
Split payment and the VAT account
Regarding split payment, SLIMVAT 3 provides for the extension of the disposal of funds deposited in the VAT account by:
- adding new taxes that can be paid from the VAT account, including retail sales tax or tonnage tax;
- allowing VAT group members to transfer funds from the VAT account to the group representative responsible for the payment of VAT.
Corrections to settlements beyond the VAT OSS/ MOSS system
EU taxpayers who settled under the OSS system and then stopped settling under the OSS system have a significant problem with correcting settlements retrospectively. The OSS system allows all transactions to be accounted for in the country of identification and therefore avoids VAT registration in many EU countries. However, in the case of stopping the use of OSS, the correction of retroactive settlements is only possible in the specific Member State of consumption.
Poland does not yet have the formal possibility of accepting corrections to declarations in this way. SLIMVAT will enable declarations to be made using a tax application. The declarations will be handled by the Łódź Tax Office.
The changes to the regulations bring Polish law up to date with current EU Court of Justice jurisprudence and close gaps in the regulations. These were mainly the demands of taxpayers themselves. We will not find here any revolutionary simplifications, but the changes will certainly be useful for taxpayers who operate in international trade.
Dominika Zbonik, LL.B., Attorney-at-law (PL)/Tax advisor (PL)