As of October 1, 2020, the tax reality in Poland changed. From that date, VAT taxpayers are obliged to report VAT according to the new electronic structure in the form of SAF-T_V7M or SAF-T_V7K. The purpose of the action was to simplify reporting. Did it work?
Until the settlement for September 2020, the taxpayers registered as an active VAT were obliged to submit VAT-7 or VAT-7K declarations and there was an obligation to separately submit the Standard Audit File (SAF-T file), which had to be submitted by the deadline for the declaration – the document had to be submitted every month, even if the entrepreneur accounted for quarterly.
Based on the amending to the VAT Act and some other acts dated July 4, 2019, a revolution took place by introducing a new SAF-T file structure with a declaration in two variants: as SAF-T _V7M (for monthly settlement) and SAF-T_V7K (for quarterly settlement) so-called SAF-T_VDEK.
SAF-T_VDEK consists of the declaration and records parts and has replaced the previously submitted declaration and the SAF-T file. The Ministry of Finance while promoting the new solution stated that this is undoubtedly a simplification, reducing costs by eliminating the submission of double-repeated information. Is it true?
More code transactions
Unfortunately, the legislator went a few steps further. Under the guise of simplification, the scope of reported data has been significantly expanded. From the settlement for October 2020, active VAT taxpayers must designate on an unprecedented scale individual invoices or transactions with the use of commodity and service codes (GTU), transaction, or documentation codes in the SAF-T_VDEK submitted to the tax authorities.
Therefore, the Regulation of the Minister of Finance, Investment, and Development of October 15, 2019, on the detailed scope of data contained in tax declarations and records in the field of tax on goods and services (the Regulation) was issued, slightly amended. In addition to certain data contained in the VAT records, the Regulation introduced a catalog of designations relating to delivery transactions in the form of 13 GTU codes, 13 transaction codes, and 3 documentation codes. On the other hand, on the side of the purchase transactions, 2 transaction codes and 3 documentation codes.
The scope of details of the reported data is in many cases incomprehensible. Why the Polish Ministry of Finance needs some data? Is such a scope of reporting necessary? In addition, the wording of the introduced provisions in the field of code marking is unclear. Referring in its content not only to the provisions of the VAT Act, Combined Nomenclature (CN) codes, PKWiU (2008 and 2015) but also during the analysis of the transaction in terms of its designations to PKOB, the provisions of the excise Tax Act, the Income Taxes Acts from legal entities, not to mention the provisions of pharmaceutical law is sheer madness.
The whole is subject to penalties in the form of an additional tax liability imposed by a tax authorities’ decision in the amount of PLN 500 for each mistake, which results from the VAT Act directly, or penalties from the Polish Penal Fiscal Code. The Ministry of Finance stated that the penalties are optional, determined by the circumstances of a specific case, indicating that “they will be imposed only on those taxpayers who, through deliberate, persistent actions and introduced errors, make it impossible to verify the correctness of the transaction.” Nevertheless, there is a real threat.
Where to look for explanations?
In order to somewhat clarify the ambiguities contained in the Regulation, the Ministry of Finance published on its website questions and answers regarding the new SAF-T _VDEK describing some of the doubts that arose, broken down into the technical aspects of filling in SAF-T _VDEK as well as substantive related to GTU markings, procedures or documents. In February, April, and June 2020, information brochures about the SAF-T _VDEK structure itself were published.
Unfortunately, there are still many questions without answers, and also the legal form itself is incomprehensible at all. Why? According to the Polish General Tax Act, the Minister of Finance strives to ensure the uniformed application of tax law provisions by tax authorities, in particular by interpreting them ex officio, or upon request (general tax rulings), issuing ex officio general explanations of tax law provisions concerning application of these provisions (tax clarifications). As you can see, neither the questions and answers from the Ministry of Finance nor the brochures are such sources of law.
In all this confusion and unclear provisions, taxpayers, in case of doubts, resort to another institution of tax law, which is an individual tax ruling. At this point, it is worth mentioning a few more interesting future events or facts about which the taxpayers wanted to be sure of the correctness of the markings for the purposes of SAF-T_VDEK.
Examples of questions asked by taxpayers to the director of the National Tax Information (the NTID) regarding the use of GTU and transaction codes:
Doubts regarding labeling as GTU_01 products containing alcohol with a concentration exceeding 1.2 percent volume, mainly related to the types of products for which this marking should be used.
In their tax rulings applications to the NTID, taxpayers asked whether goods such as chemical products, which are disinfectants and biocides, chemicals for motor vehicles (operating fluids, defrosters, disinfectants), products for heating purposes, solvents, cosmetics, containing alcohol in a concentration above 1.2% volume, but not intended for human consumption, should be entered in the records kept for the purposes of the tax on goods and services with the GTU 01 code.
The NTID emphasized that the mandatory GTU 01 marking applies only to alcoholic products intended for consumption, for example, the tax rulings of the NTID of February 18, 2020, 0111-KDIB3-3.4012.626.2020.2.MK; from December 28, 2020, 0114-KDIP4-1.4012.575.2020.1.AM or from November 20, 2020, 0112-KDIL1-2.4012.332.2020.1.AG.
In the tax ruling dated January 18, 2020 (0112-KDIL1-2.4012.591.2020.2.PG), the NTID confirmed the correctness of labeling as GTU 01 invoices issued in connection with the sale of Christmas sets, which include alcohol (wine) and other non-alcoholic products.
Entrepreneurs had doubts whether chemical mixtures based on denatured ethyl alcohol, sale of coal, and coke were subject to the GTU 02 labeling obligation.
The NTID, in the tax rulings issued on January 29, 2021 (0114-KDIP1-3.4012.728.2020.1.KP) and on January 26, 2021 (0114-KDIP1-3.4012.696.2020.1.MT), confirmed the taxpayers’ position, referring to provisions of the Excise Duty Act that the GTU 02 code applies only to the sale of motor fuels (used to drive internal combustion engines).
Entrepreneurs from the pharmaceutical industry supplying drugs and medical devices within the meaning of the Polish Pharmaceutical Law submitted a number of questions to the NTID regarding their doubts as to whether supplies made within the country and outside the country should be marked with GTU 09 code. The complexity concerned the correct interpretation of the provisions of the Regulation relating to the Pharmaceutical Law for deliveries within the territory of the country.
According to the tax rulings issued on January 27, 2021 (0114-KDIP4-2.4012.626.2020.1.MC), January 14, 2021 (0111-KDIB3-1.4012.953.2020.1 WN), or December 23, 2020 (0112- KDIL1-3.4012.436.2020.1.AKR) the NTID indicated that GTU 09 code applies only to goods for which the obligation to declare referred to in art. 37av section 1 of the Pharmaceutical Law. Consequently, there is no obligation to mark GTU 09 for products covered by domestic delivery. Thus, this obligation applies only to goods that are exported outside Poland or sold to an entity operating outside of the territory of Poland.
In the tax ruling dated February 8, 2021 (0112-KDIL3.4012.688.2020.2.MS), the taxpayer asked whether independent separate residential and commercial premises, e.g., garages, constitute buildings or structures within the meaning of the Construction Law and whether they are a supply of goods subject to the GTU 10 mark.
The NTID pointed out that the GTU 10 designation applies not only to the delivery of buildings, structures, and land but also includes the delivery of parts of structures and buildings, including shares and the delivery of shares of land. However, in the case of the sale of a parking space in the form of a right to use a parking space, which is a service within the meaning of VAT, the application of GTU 10 does not apply.
Within GTU_12, applicants asked about quite different types of services from division 42, division 70, or division 85 of PKWiU 2015 (the Polish Classifications of the Goods and Services 2015).
In the tax ruling dated February 23, 2021 (0114-KDIP4-2.4012.547.2020.2.WH), the NTID answered the question of whether infrastructure management (…) should be covered by the GTU 12 commodity group code covering the provision of management services. According to the applicant, the services described in the application should be qualified under PKWiU 42.12.20 – General construction works related to the construction of railways and underground railways. There is no definition of intangible services in the applicable regulations. In accordance with the recommendation of the Minister of Finance, when specifying the appropriate code for a given invoice, the PKWiU 2015 classification should be used. PKWiU 42.12.20, covering general construction works related to the construction of railways and underground railways, is not included in the list subject to GTU 12, however, the actual nature of the subject of the contract should be considered.
The NTID pointed out that the GTU 12 provision should be understood relatively broadly, considering the actual content of the service provided. It should be emphasized that PKWiU 2015 may be used as an auxiliary. PKWiU symbols in the scope of management services are: 62.03.11, 62.03.12, 63.11.12, 66.11.19, 66.30.11, 66.30.12, 68.32.11, 68.32.12, 68.32.13, 69.20.4, 70.22.17, 70.22.2, 90.02.19.1. The classification given in the application does not fit into the above-mentioned PKWiU symbols but refers to Section 42. As a consequence, the described services should not be marked with the GTU 12 code in the records, as these are not services listed in the Regulation.
On the other hand, in the tax ruling dated December 30, 2020 (0114-KDIP1-1.4012.670.2020.2.RR), the taxpayer asked whether the services consisting of performing activities as the president of the management board of the company, classified in PKWiU 2015 under the symbol 70.22.17 should be labeled as GTU 12.
The answer of the NTID was positive. GTU 12 should be understood relatively broadly, considering the actual content of the service provided. PKWiU symbols in the field of management services are: 62.03.11, 62.03.12, 63.11.12, 66.11.19, 66.30.11, 66.30.12, 68.32.11, 68.32.12, 68.32.13, 69.20.4, 70.22. 17, 70.22.2, 90.02.19.1. Therefore, since the applicant, as part of his activities, performs for the benefit of the company activities classified under the symbol PKWiU 2015 – 70.22.17, which are provided as part of the function of the president of the company’s management board, it should be stated that he provides intangible services, which are listed in the Regulation, which should be marked with the GTU 12 code.
Another tax ruling dated December 21, 2020 (0114-KDIP1-3.4012.528.2020.3.ISK) concerned the answer to the question whether services in the field of first-cycle studies, e.g. fees for repeating a subject or issuing an ID card; graduate studies; second-cycle studies and long-cycle studies; third-cycle studies; the so-called University of the Third Age; participation in courses, conferences and seminars and teaching foreign languages) should be marked as GTU 12.
The answer of the NTID indicates that PKWiU in section 85 refers to educational services, without using the concept of training services within individual groupings. However, in the Explanations of the Polish Central Statistical Office to PKWiU of 2015, it was indicated in the description of group 85.8 that this group includes specialist training other than those included in the respective groupings of groups 85.1-85.4, which in turn suggests that also as a part of higher-degree studies classified in grouping 85.42, training services are included. Therefore, it should be considered that pursuant to § 10 para. 3 point 2 lit. b) of the Regulation, the taxpayer is obliged to use the labeling GTU_12 in relation to the services described, which are covered by the PKWiU 85 symbol.
In the tax ruling dated January 7, 2021 (0114-KDIP4-3.4012.561.2020.2.EK), the applicant asked whether his position was correct, according to which the forwarding and logistics services provided by the Applicant were marked with PKWiU: 52.21, 52.22, and 52.23 should be marked in the records referred to in the Regulation – with GTU 12 as for advisory services, or with GTU 13 as for transport services. In the opinion of the NTID, the marking “13” will not be used for forwarding and logistics services, as these services do not fit into the grouping ex 52.1. At the same time, since the services in the field of forwarding and logistics have been classified by the Applicant to PKWiU: 52.21, 52.22, 52.23 as services supporting land, sea, inland, and air transport, it cannot be considered that they constitute advisory services or management services mentioned in the Regulation. Thus, services supporting land transport (PKWiU: 52.21), services supporting sea transport (PKWiU: 52.22), services supporting inland transport (no PKWiU – included in PKWiU 52.22), and services supporting air transport (PKWiU 52.23) should not be labeled in the records with GTU 12 code, as these are not services listed in the Regulation.
In the case of the TP code, the questions asked in this regard are surprising, because, in some justifications of their positions, taxpayers argued that it was not necessary to enter transactions with related entities with the TP code due to low transaction amounts for example tax rulings dated on February 3, 2021; 0111-KDIB3 -1.4012.876.2020.2.KO or January 22, 2021; 0112-KDIL1-2.4012.574.2020.2.ST). The NTID’s reply was negative.
There is also in the tax ruling dated December 2, 2020 (0112-KDIL1-2.4012.427.2020.1.PM) regarding the need to label as TP intra-Community acquisition of goods or import of services in the case of purchases from entities that are part of an international capital group. Despite the interesting arguments of the applicant for the lack of necessity to mark TP such transactions between related parties, the position of NTID was different.
An interesting issue raised in the applications regarding the MPP code was the issue of advance payments. In the tax rulings dated January 5, 2021 (0114-KDIP1-1.4012.690.2020.2.AKA) and December 16, 2020 (0114-KDIP1-1.4012.659.2020.1.RR of December 16, 2020), the NTID recognized as the incorrect position of the applicants regarding the use of the MPP marking in SAF-T _VDEK to transactions subject to the obligation to use the split payment mechanism regarding advance invoices not exceeding PLN 15,000, the value of which in the contract exceeds PLN 15,000. The argument of the NTID was that in the case of advance payments, whether the obligation of payment in split payment mechanism arises the general rules applies, i.e. the gross value of the invoice and the subject of the transaction (delivery of goods or services from Annex 15 to the Polish VAT Act). In addition, it should be noted that advances under the split payment mechanism are not covered by the complex payment system. The wording of the Regulations in the above scope clearly refers to the payment of invoices. Therefore, it should be stated that in the case of advance invoices, the indicator of whether or not the split payment mechanism is used is the gross value of the invoice issued.
What needs to be fixed?
First, it is a question of the institution of voluntary disclosure. The problem with submitting the voluntary disclosure, already widely described in the press, arose just after October 1, 2020, when the provisions on the new SAF-T_VDEK entered into force. SAF-T_VDEK consists of the record and declaration parts. The record part is a book within the meaning of the Polish Penal Fiscal Code, which provides a penalty for submitting an unreliable or defective book.
Before October 1, 2020, the issue of voluntary disclosure was not that problematic. Currently, voluntary disclosure is not needed only when the SAF-T_VDEK correction concerns only the declaration part. The Polish Penal Fiscal Code has not changed in this part. It is different when the errors are in the record part and you need to submit a correction of this part only or the record and declaration part jointly.
The Ministry of Finance confirmed that each change of the record part requires the submission of the voluntary disclosure. Otherwise, the penalty may be imposed on the taxpayer. Therefore, there are demands to change the regulations as soon as possible, because they only make difficulties for entrepreneurs. Departmental works in this area are said to be in progress.
At the same time, changes are made to the number of penalties in the Polish Penal Fiscal Code, for example increasing penalties for tax offenses. Currently, under the criminal fine can be imposed a fine within the limits not exceeding double the amount of the minimum wage in Poland described in the Penal Fiscal Code. After changes, it will be possible to impose a fine not exceeding five times the amount of the minimum wage.
Changes are coming
On March 17 this year, a draft regulation of the Minister of Finance, Funds and Regional Policy was published on the government website, amending the Regulation on the detailed scope of data contained in tax declarations and records in the field of VAT.
This draft presents again a number of changes in the field of VAT reporting through the SAF-T_VDEK structure. And we come back to the key point of the problem again.
It is good that the Ministry of Finance proposes a change and wants to clarify the ambiguities.
The clarification of the provisions regarding, for example, the GTU 01 code is also positive. The reference to specific CN codes 2203-2208 is intended to clarify the doubts as to what specific goods fall under the concept of alcoholic beverages covered by this code. Also, clarification in the GTU 02 and GTU 03 codes, where the change is to eliminate doubts as to the doubled labeling to these codes for the same deliveries, for example, heating oil. The controversial GTU 09 provision (existing drugs and medical devices) has also been changed, and the GTU 12 has changed in the field of intangible services by adding specific PKWiU symbols according to the PKWiU 2015 classification.
Unfortunately, in a few cases, it is not so good anymore. A negative example is a change in transactions settled based on the split payment mechanism (SPM). The intention is in place of marking transactions settled in the obligatory SPM, to introduce regulations that the SPM marking applies to all transactions covered by the SPM, i.e. not only those covered by the obligatory mechanism but also those for which this mechanism is applied voluntarily.
From the purchaser’s point of view, this action will not be so difficult, because he received an invoice with the SPM designation – although the mechanism, in this case, is optional – he will pay in this form. On the supplier’s side, the matter becomes more complicated. If he issues an invoice with the SPM marking for a transaction where there is no obligation to use this form of settlement, and the purchaser ignores it and pays by ordinary transfer, should he still mark this transaction as SPM? Should he analyse the receipts on the account and if he received the payment in the SPM, does it mean it should be labeled as such, and if not, he does not mark it? Due to the fact the payment terms are several or several dozen days, then the supplier should make SAF-T_VDEK corrections and delete or designate transactions as SPM? To submit the voluntary disclosure to the tax authorities also? These are issues that may raise reasonable doubts.
Change in marking transactions as “TP” between related entities. It is planned to introduce a threshold of PLN 15,000 gross, above which the transaction will be marked with the above-mentioned code. It is a good idea because we get rid of the so-called small transactions during labeling. Probably the inspiration for the amendment was taken from the application of the tax rulings, in which taxpayers for unknown reasons justified their position not to mark transactions with related entities as “TP” with a low value of the transaction. Why so? After all, no provision provides for the threshold. Therefore, the amendment of the Regulation introduces a threshold below which the markings will not have to be used. Unfortunately, the mere fact of specifying PLN 15,000 gross as the total amount of receivables resulting from the implementation of one contract is not a good idea. For one contract with a value exceeding PLN 15,000 gross, there can be at least several invoices. Monthly intra-company analysis of contracts for issued invoices or, for example, transactions of intra-Community acquisition of goods, import of services, and reporting in SAF-T_VDEK will be a nightmare – to mark it or not.
Unfortunately, the pace of changes and the way of proceeding are also a mystery. The draft of the amendments to the Regulation was dated March 9 this year, published on March 17, the submission of opinions to the draft was until April 6, 2021, but note – some of the provisions from the new Regulations that are crucial for VAT reporting want Ministry of Finance to be entered into force from the settlement for April and some only from July 2021.
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CEE VAT Compliance Director
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