Poland – VAT grouping

In the agenda of the VAT Committee meeting that took place on 16 November 2020, one of the items discussed was the issue of introducing VAT grouping in Poland precisely described in the Working Papers No. 997 addendum.

VAT grouping results from art. 11 of the VAT Directive but has not been implemented in Poland so far.

The Working Papers No. 997 shows that Poland already has a text of the relevant national draft legislation annex in this regard. The general assumptions from the extract of the national draft legislation presented in the Working papers No. 997, as we understand, are that:

  • the VAT group will be an optional institution for businesses;
  • the VAT group may be created by members of a tax capital group that has the status of a corporate income taxpayer within the meaning of the Polish CIT regulations – to obtain the status of a VAT group, you need to meet the conditions for being a CIT taxpayer;
  • the company agreement, the purpose of which is to create a tax capital group, must contain a declaration that the tax capital group will also be a VAT taxpayer for the duration of the agreement and indicate the name of the taxpayer containing an additional designation “VAT group” or “VG”;
  • the holding company represents the VAT group as regards the obligations resulting from the VAT Act;
  • the VAT group shall lose its status of a taxpayer in the case where it ceases to meet the conditions related to connections or if it loses the status of a corporate income taxable person. If, during the term of the agreement, there is a change in the factual or legal status resulting in a breach of the conditions of recognizing the VAT group as a VAT taxpayer, the day preceding the day on which such changes occur shall be a day on which the VAT group loses its status of a taxpayer;
  • supplies of goods and services by an entity belonging to the VAT group to another entity belonging to the same group shall not constitute taxable transactions;
  • supplies of goods and services by an entity belonging to the VAT group to an entity which does not belong to that group shall constitute supplies carried out by the group;
  • supplies of goods and services to an entity belonging to the VAT group by an entity which does not belong to that group shall constitute supplies carried out to the group;
  • entities comprising the VAT group shall keep a record of transactions in electronic form. The record shall be provided to the tax authorities upon their request and contain the information indicated in the regulations;
  • entities comprising the VAT group are jointly and severally liable for its VAT liabilities due for the period in which they operated;
  • the proportion provisions resulting from VAT regulations, also apply to the VAT group, if needed
  • probably there will be no sector restrictions for the VAT groups.
  • as regards branches of foreign companies, it should be pointed out that during the first phase of implementation the VAT group in Poland, such entities would not be able to become members of VAT groups, what results from the assumed scope of entities comprising the VAT group. It is envisaged that the branches of companies can join VAT groups in the next stage, following the implementation of the target system of VAT grouping which will be open to a much higher number of entities.

The Polish government stressed in the Working papers No. 997 that this draft is temporary, in order to gain the necessary experience e.g. in managing or controlling the VAT group system. The proposed measure is considered –  to be implemented in the first stage – as a pilot program, which will be amended in the further stages towards the system enabling to form VAT groups also by small and medium-sized enterprises (open model). At the “pilot” stage the Polish government would like to design a solution that will be available for larger companies.

Anna Szafraniec
CEE VAT Compliance Director

Łukasz Woźniak
VAT Compliance Manager

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