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SLIM VAT 3 is another package of measures intended to make it easier to pay VAT. The previous two packages improved and simplified the payment of indirect taxes. Remember, though, that not all measures were welcomed and some simplifications were not necessarily easy to implement. The latest package aims to meet many requests from entrepreneurs and districts working on tax solutions. This identified areas requiring change that were labour- and time-intensive. The measures simplify and facilitate checks, make invoicing easier, reduce formalities and improve companies' liquidity. Moreover, the proposal implements the EU Court's judgment in case C-935/19, in which the court found that EU law precludes the application of Poland's existing 20% sanction.
Changes to the proportion of advance payments
In most cases, as taxpayers, we cannot deduct all input tax because we also carry out exempt activities. We can then make a proportional deduction. In particular cases, however, a multiplier or pre-multiplier applies. Until now, in selected circumstances it had to be agreed in advance with the head of the tax office in an official document. The new rules remove the obligation to agree a protocol on proportional reduction of input VAT with the head of the office. Instead, the head must be informed of the proportion adopted.
The amount below which a proportion of deductible tax can be treated as 100% when that proportion exceeds 98% was also raised from PLN 500 to PLN 10,000. This concerns those of us who carry out both VAT-taxable and non-taxable activities and allows full VAT deduction for those whose turnover consists to a significant extent of VAT-related transactions.
As taxpayers, we need not adjust VAT at year-end if the difference between the initial and final rates does not exceed two percentage points and the final rate is lower than the initial one. Moreover, those proportions and the so-called long-term adjustment do not exceed PLN 10,000.
Increase in the small-taxpayer sales limit
Until now, a VAT taxpayer had small-taxpayer status if sales including tax did not exceed EUR 1,200,000 or an equivalent of EUR 5,000 in zlotys in the previous tax year, for example in the case of taxpayers running brokerage offices and investment funds whose fee equals brokerage commission. The upper limit increased to EUR 2,000,000. This is clearly positive because more taxpayers can use VAT Act incentives for small taxpayers, including cash-based accounting.
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Changes in currency conversion for correcting invoices
We often need to correct an invoice after issuing it. For invoices issued in a foreign currency, correcting invoices must also be issued in that currency.
The previous rules did not make entirely clear which exchange rate should be used to convert a correction. Many taxpayers were unsure how to proceed.
Under the changes, both upward and downward corrections use the original rate, that is, the exchange rate applied to the original invoice.
The only exception is a collective correcting invoice for a discount or rebate. In this case, the average rate from the last working day before the collective correction invoice applies.
Having an income-tax invoice when deducting input VAT
Accounting for VAT for income-tax purposes depends on holding an invoice. Taxpayers must have an invoice confirming the transaction. Importantly, the deadline for receiving it is precisely three months. In practice, we had to correct the tax return after three months.
The justification for the measure says: “This means that input tax charged and paid on an intra-Community acquisition is always settled in exactly the same period, and VAT on the intra-Community acquisition is also settled. Intra-Community purchases are entirely neutral for the taxpayer. As a result, the change eliminates the need to check whether the three-month deadline for receiving an invoice was exceeded.”
This is a positive change, although currently it has little impact on VAT invoicing beyond the need to meet the three-month deadline.
Fund management
Under the previous law, only services relating to funds located in Poland were VAT-exempt. Managing funds abroad was therefore subject to VAT. The latest rules mean that all financial management services may be exempt. WIS, WIA and STI
WIS is issued by one authority; WIA by the Director of the Tax Administration Chamber in Wrocław. As for STT, it is issued by the President of the Tax Administration Chamber in Warsaw, competent in WIP and STT matters (first instance), and WIA (second instance). Given the fragmentation of the authorities providing binding information, it is relatively difficult to maintain consistency, which in many cases is absent.
Information is provided by a single institution, the State Tax Information service.
Reduced sanctions
According to the Court of Justice judgment in C-935/19, taxpayers who make mistakes in VAT records should not be treated as criminals or tax evaders.The court's position required changes to the VAT Act. SLIM VAT should bring the rules into line with the judgment.
Under these changes, a provision will replace the previous penalties of 30%, 20% and 15% with maximum penalties of 30%, 20% and 15%. Maximum penalties apply only to tax evasion. This means penalties for taxpayers who simply make mistakes will be much lower. The change can certainly be regarded as positive, though only after the law is published will it be possible to see how it is implemented.
In summary, we have described the most important changes in SLIM VAT 3. They are undoubtedly positive and will simplify VAT settlement. The changes to VAT sanctions are particularly welcome.
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