Indirect tax snapshot
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Value Added Tax (VAT) is the main type of indirect taxation in Poland and in other European Union (EU) countries.
It is a tax on consumption which is applied during the production and distribution process to most goods and services. It is also applied to goods, and certain services, entering the country. Although VAT is ultimately borne by the consumer by being included in the price paid, the responsibility for charging, collecting and paying it to the tax authority at each stage of the process rests with the business making the supply, ie the sale.
A business registered for the tax will charge VAT (output tax) on its sales, and incur VAT (input tax) on its purchases (including any VAT paid at importation). The difference between the output tax and the deductible input tax in each accounting period will be the amount of VAT payable by the business to the tax authority. Where the input tax exceeds the output tax, a refund can be claimed.
A transaction is within the scope of Polish VAT if the following conditions are met:
- it is a supply of goods or The supply of goods shall be understood as transfer of the right to dispose of the goods as their owner. The provision of services shall be understood as each performance for the benefit of a natural person, legal person or organizational unit without legal personality which does not constitute supply of goods
- it takes place in Poland
- it is made by a taxable Taxpayers shall be legal persons, organizational units without legal personality and natural persons, who individually carry on the economic activity regardless of the purpose or results of such activity. Economic activity shall include any activity of manufacturers, traders or service providers, including the subjects acquiring natural resources and farmers, as well as the activity of persons practising liberal professions. Economic activity shall particularly include activities consisting in using goods or intangible fixed assets in a continuous manner for profit-gaining purposes.
There are three rates of VAT that are applied to goods and services in Poland; the standard rate, the reduced rates, and the zero rate. In addition, some goods and services are exempted from the tax.
Businesses that make exempt supplies are unable to claim all of the input tax that they incur, so the VAT paid to suppliers will be a ‘real’ cost.
Most goods imported into Poland from outside the EU are subject to VAT. The tax will have to be paid by the importer at the time of importation. Where the importation is for business purposes and the importer is registered for VAT, it may be possible to reclaim the tax (subject to certain rules).
It is also important to note the interaction between VAT and Customs duty. Customs duty is levied across the EU at the place where goods are imported into the community. It is levied in order to bring the cost of goods produced outside the EU up to the same level as those produced within it. Once duty (and VAT) has been paid by the importer, the goods are in ‘free circulation’ and they can then be released for use in the home market. Unlike other indirect taxes, such as VAT, once duty has been paid it is not usually recoverable by the importer. It therefore represents a bottom line cost to the importing business if it cannot be passed on in higher prices.
It is therefore very important to ensure that the correct rate of duty is applied. VAT is charged on the value of the importation, including any custom duty.
A ‘person’ who either makes or intends to make taxable supplies of goods or services in the course or furtherance of a business must register for VAT if the value of its taxable supplies in Poland exceeds the annual registration limit, or is expected to exceed the limit in the near future. A business can register on a voluntary basis even if the registration limit has not been exceeded.
The sale carried out by taxpayers for which the total sales value did not exceed in the preceding tax year the amount of 200,000 PLN shall be exempt from tax. The value of sales shall not include the tax amount.
A penalty may be imposed by the tax authority if a business fails to register at the correct time.
The normal VAT registration limit does not apply to businesses who are not established in Poland, but for the purposes of the tax are making taxable supplies there. Those businesses will need to register for VAT as soon as they commence trading in Poland, irrespective of the level of turnover.
There is a special scheme for telecommunication, broadcasting or electronic services supplied by subjects having their seat of economic activity in the EU but not having such a seat in a member state of consumption, to persons not being taxpayers.
A taxpayer providing telecommunication, broadcasting or electronic services to persons not being taxpayers, having their seat, permanent place of residence or ordinary place of stay in a Member State of consumption, may submit a notification indicating the intention to make use of the special VAT- settlement scheme in the Member State in which it has:
- its seat of economic activity
- a permanent place of carrying on economic activity, if it does not have its seat of economic activity in the territory of the EU
- a permanent place of pursuing economic activity and that it chooses for the purpose of submission of the notification, if it does not have its seat of economic activity in the territory of the European Union, but has more than one permanent place of pursuing economic activity in the territory of the EU.
Where Poland is the member state of identification, the notification shall be filed to the relevant tax office by electronic communication means.
Taxpayers identified for the purposes of a special VAT- settlement scheme shall be obliged to file by electronic communication means returns for the purposes of VAT settlement, hereinafter referred to as VAT returns, with Drugi Urząd Skarbowy Warszawa-Srodmiescie [the Second Revenue Office Warsaw-Centre].
VAT returns shall be submitted for quarterly periods, by the 20th day of the month following each subsequent quarter.
Taxpayers identified for the purposes of a special VAT- settlement scheme shall be obliged to keep in electronic form records of the transactions covered by the special VAT- settlement scheme, in accordance with the requirements referred to in Article 63 c of Regulation No 282/2011.
The VAT records referred to shall be stored for the period of ten years from the end of the year in which the telecommunication, broadcasting or electronic services were provided.
The taxpayer not having his seat of economic activity or permanent place of carrying on economic activity in the territory of a Member State, which is subject to the duty to register as an active VAT payer, shall be obliged to appoint a tax representative.
The taxpayer having his seat of economic activity or permanent place of carrying on economic activity in the territory of a Member State other than the territory of the country may appoint a tax representative.
The minister competent for public finance may, by regulation, specify the cases in which there is no need to appoint a tax representative, taking into account the need to ensure a correct tax settlement by subjects not having their seats of economic activity or permanent place of carrying on economic activity in the territory of a member state.
As a general rule businesses from EU, UK or Norway are exempt from appointing fiscal representative, but they may opt to have it. Other entities from non-EU countries are obliged to appoint fiscal representative.
The taxpayers shall be obliged to submit their electronic files to the tax office monthly, by the 25th day of the month following each subsequent month.
Polish Fiscal Penal Code stipulates certain penalties for late submission of returns and late payment of tax.
The late submission or late payment of tax is not extra penalized on condition that the taxpayer submits the return and pays tax before formal tax audit begins. Otherwise if lack of submitting is revealed due to tax audit, there is extra additional penalty payment amounting 30% of the tax due. Late payment of tax triggers also the obligation to calculate and pay interest.
Also penalty interest are calculated and taxpayer is obliged to pay it. It taxpayer pays late VAT by himself he has to calculate the interests according to proper rate established by law (currently it is 8% per annum). However if tax authority finds out the irregularity, the penalty interests increase to 150% of rate therefore now it is 12% per annum.
Businesses that are registered for VAT in Poland, and make supplies of goods or services to traders registered for the tax in other EU countries are required to complete and submit EC Sales Lists (ESLs). The ESLs must show details of the recipients of the goods and services.
Summary information documents shall be submitted for monthly periods by electronic means by the 25th day of the month following the month in which the obligation arose upon the completion of the transactions.
In addition, if the value of the intra-EU trade in goods dispatched or arriving from other EU is above an annual threshold, a supplementary declaration (referred to as an Intrastat declaration) has to be submitted for either or both. These declarations have to be submitted on a monthly basis.
Yes. A range of penalties can be imposed where businesses do not comply with the VAT rules. These penalties come from Penal Fiscal Code.
Penalties and interest can be applied for errors and omissions made on tax returns, or where the tax is paid late. Penalties can also be applied where the business has failed to maintain adequate records, provide information (including additional declarations), or makes repeated mistakes.
Criminal proceedings may be brought in the case of more serious matters.
Yes, it may be possible to reclaim the VAT incurred in certain circumstances.
Two schemes exist, one for businesses established in the EU and another for businesses established elsewhere.
The EU cross border refund scheme is available in all EU member States, and enables a business established in an EU country to recover VAT incurred in another member State. To be eligible to make a claim, the claimant must be a taxable person established in an EU member State other than the one from which the claim is to be sought. In addition, the claimant:
- must not be registered, liable, or eligible to be registered in the member State from which he is claiming the refund
- must have no fixed establishment, seat of economic activity, place of business or other residence there
- during the refund period he must not have supplied any goods or services in the member state of refund, apart from certain limited exceptions.
The amount that is refundable is determined by the deduction rules that apply in the country making the refund. The claim is submitted electronically to the tax authority from whom the repayment is being sought.
The refund period must not cover more than one calendar year or less than three calendar months – unless it is covering the remainder of a calendar year. The claim has to be made by 30 September of the year following that in which the VAT was incurred.
Businesses established outside of the EU can, subject to certain conditions, also reclaim the VAT incurred on imports into Poland or purchases of goods and services used in Poland. The scheme is available to any person carrying on a business established in a third country, ie outside the EU, provided that in the period of the claim:
- he was not registered or liable to be registered for VAT in Poland
- he was not established in any EU country
- he made no supplies of goods and services in Poland other than certain specified exceptions
- where he is established in a third country having a comparable system of turnover taxes, unless the Polish tax authority allows otherwise, that country provides reciprocal arrangements for refunds to be made to taxable persons established in Poland.
A VAT invoice must show:
- an invoice number which is unique and sequential
- the seller’s name and address
- the seller’s VAT registration number
- the invoice date
- the time of supply (also known as tax point) if this is different from the invoice date
- the customer’s name and address
- a description sufficient to identify the goods or services supplied to the customer
- the rate of any cash discount
- the total amount of VAT charged expressed in PLN.
For each different type of item listed on the invoice, the following must be shown:
- the unit price or rate, excluding VAT
- the quantity of goods or the extent of the services
- the rate of VAT that applies to what’s being sold
- the total amount payable, excluding VAT.
Where a VAT invoice exempt goods or services, it must:
- show clearly that there is no VAT payable on those goods or services
- show the total of those values separately
- show clearly the provision of the Act or an instrument issued under the Act on the basis of which the taxpayer applies tax exemption or the provision of Directive 2006/112/EC which exempts such supply of goods or such provision of services from tax or other legal grounds indicating the fact that supply of goods or provision of services is subject to tax exemption.
Where a business makes retail sales and makes a sale of goods or services for 100 or less including VAT, a simplified VAT invoice can be issued.
VAT invoices can be issued, received and stored in electronic format and there is no need to tell the tax authority. Electronic invoices must contain the same information as paper invoices. The method used to ensure the authenticity of origin, the integrity of content and legibility of the invoices is a business choice and can be achieved by any business controls which create a reliable audit trail between an invoice and a supply of goods or services. The authenticity of the origin and integrity of the content of an electronic invoice are guaranteed, in particular, by means of:
- an advanced electronic signature within the meaning of Article 3, subparagraph 2 of the Act of 18 September 2001 on Electronic Signature (Dziennik Ustaw 2001, 130, item 1450, as amended), verifiable by means of a valid qualified certificate
- electronic data interchange (EDI) in accordance with the European Model EDI Agreement, where the agreement relating to the exchange provides for the use of procedures guaranteeing the authenticity of the origin of invoices and integrity of their data.
The use of electronic invoices shall be subject to acceptance by the invoice recipient.
The invoices shall be drawn up in at least two copies, one of which is issued to the acquirer and the other one is kept in files by the taxpayer affecting the sale.
The invoice shall be issued not later than on the 15th day of the month following the month in which the goods or services were supplied (general rule, the exceptions refer to specific transactions).
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