Since the New Year, some of the changes from the so-called SLIM VAT package (simple, local and modern) prepared by the Ministry of Finance, which we analysed in one of the previous entries, have come into force. The new regulations were intended to introduce tax simplifications for entrepreneurs, but they already raise some doubts among taxpayers. Below we have described the most important changes, which entered into force on 1 January 2021.
Correction invoices in minus
According to the announcements, thanks to the SLIM VAT package, taxpayers no longer have to obtain confirmation of receipt of a correcting invoice from their business partner. However, this does not mean that there are no documentation obligations on the part of the issuer of the correcting invoice.
The new regulations allow the taxpayer to include the correcting invoice in minus at the moment of its issuance, if:
- the documentation in his possession shows that he has agreed with the purchaser of goods or services on the conditions for reducing the tax base, specified in the correction invoice;
- the correcting invoice is in accordance with the documentation in its possession.
The amendment does not specify what the documentation should look like. In principle, the catalogue of documents remains open. The explanations for the draft amendment indicate that these may include, in particular, annexes to contracts, commercial correspondence (including e-mail), proofs of payment refund or compensation documents.
The buyer of goods or services reduces the amount of input tax in the settlement for the period in which the conditions for reducing the tax base have been agreed.
Correction invoices in plus
The legislator has also introduced rules on the recognition of in plus correction invoices. A correction invoice in plus is included in the settlement for the period in which the cause of the increase in the tax base arose.
If the reason for issuing the correcting invoice existed originally (e.g. resulted from an incorrectly issued original invoice), it should be included in the settlement for the period in which the original document was shown. If the reason for issuing a correcting invoice results from circumstances that already occurred after the original invoice was issued (e.g. an increase in price), it should be included in the settlement for the period in which it was issued.
The amendment also introduces an interesting construction concerning the possibility of postponing the application of the new regulations. Taxpayers may agree in writing with their business partners to settle invoices issued in 2021 according to the old rules.
Exports and 0% VAT rate
Taxpayers will be able to apply a 0% rate for the export of goods to the advance payment received before delivery. The condition is that the goods will be exported within 6 months (so far it has been two months), starting from the end of the month in which the taxpayer collected the advance payment, provided that within this period he has also received documentation confirming that the goods were exported outside the EU.
Simplifying the conversion of invoices in foreign currency
The SLIM VAT package has also simplified the conversion of invoices issued in foreign currency. Currently, it will be possible to use in such situations the exchange rate according to the income tax regulations applicable to the taxpayer for the purpose of settling a given transaction. This will avoid the need to double-calculate the value of one invoice.
Taxpayers can choose how to convert invoices. The decision is binding – a taxpayer who has chosen to convert the exchange rate for VAT purposes according to income tax regulations is obliged to use the chosen option for the next 12 months. Similarly, in the case of resignation from this method, the taxpayer will be obliged to apply the general rules for the next 12 months from the date of resignation.
In the case of transactions which are not subject to income tax (e.g. VAT settlement by the purchaser), the existing rules should be applied.
In accordance with the announcements, facilities have been introduced in VAT settlements for entrepreneurs, including, among others, the following:
- extension of the deadline for VAT deduction from invoices to four monthly settlement periods;
- the possibility to deduct VAT from invoices for overnight accommodation services purchased for resale;
- increasing the limit for unrecorded gifts of small value from PLN 10 to 20.
Clarification of the provisions on Binding Rate Information (WIS)
The amendment to the act clarifies the provisions concerning the issuance and validity of the WIS, which until now have not resulted directly from the regulations. The changes will cover then:
- the possibility of classifying goods according to PKWiU (Polish classification of goods and services) – until now it was possible only on the basis of the Combined Nomenclature or PKOB (Polish classification of buildings), while some of the VAT regulations apply to goods classified according only to PKWIU;
- determining the period of validity of the WIS, which will be 5 years from the date of its issue. The regulation will also cover information issued before the new regulations come into force. WIS issued before 01 January 2021 will be valid for a period of 5 years from the date of entry into force of the amendment.
- information of the WIS which will not be issued if the subject matter of the application coincides with the subject matter of the pending proceedings or the case has been resolved in a decision or ruling of a tax authority;
- exclusion of protection of the taxpayer in case when the goods, services or comprehensive services covered by the WIS will be subject to a decision issued in connection with the occurrence of an abuse of rights.
The above changes introduce uncertainty. Controversy is particularly aroused by the “shortening” of the validity of already issued (originally unlimited) WIS to a period of 5 years.
Split payment mechanism
With regard to the split payment mechanism, it has been introduced that an amount equivalent to the amount of import tax and customs duties can be paid from the VAT account to customs agencies. This will allow for the effective and real disposal of funds in the VAT account of entities importing goods.
Removal of the definition of delivery in chain transactions
The amendment has removed the definition of delivery in chain transactions from the VAT Act. The change – as assumed by the legislator – is of an orderly character. It aims to eliminate discrepancies between national law and EU law, as there is no definition of supply in a chain transaction in EU legislation.
Despite assurances of orderly nature, the change may have serious practical consequences for businesses. The deleted provision of Article 7(8) of the VAT Act was an element, and very often also one of the legal bases for justifying tax interpretations issued in cases involving chain transactions. A change in the legal status may lead to the taxpayer being deprived of protection resulting from compliance with the issued interpretation. It is therefore worth analyzing whether this change affects the tax interpretation obtained.
SLIM VAT – facilitation and debate
The changes contained in the SLIM VAT package, which have entered into force, partly make things easier for taxpayers. However, there are still a number of issues that may raise questions of interpretation and, consequently, uncertainty as to the correct accounting for VAT. Such issues include the documentation of the conditions for reducing the tax base for correction invoices or the continued validity of the individual interpretations issued in the light of the repeal of the definition of supply in chain transactions.
Dominika Zbonik, Attorney at law and tax consultant in Poland