SLIM VAT 3 – changes in value-added tax

The Ministry of Finance presented a package of simplifications in value-added tax so-called SLIM VAT 3 (Simple Local And Modern VAT).

Planned changes are divided into 7 areas:

• impact on the financial liquidity of companies;
• less formalities in VAT in international trade;
• extension of the scope of VAT exemptions;
• changes in VAT settlement;
• changes in invoicing process;
• reduction of VAT penalties;
• consolidation and standardization of binding VAT rates information;

Impact on the financial liquidity of the taxpayers

• Taxpayers will be able to use means from VAT account to pay for more public-law liabilities such as tonnage tax, sugar fee, and fee from alcoholic beverages.
• It will be possible to transfer means from the VAT account from members of the VAT group to the representative of this group, who will be settling the VAT on behalf of the group.
• The limit entitling to obtain the status of a small taxpayer, which enables quarterly VAT settlements and the use of the cash basis method for VAT settlements, will be increased from 1.200.000 EUR to 2.000.000 EUR.
• Currently, if the taxpayers perform taxable activities taxed and exempt from VAT, they may apply the deductible proportion 100% if the actual deductible proportion exceeds 98% and the non-deductible input VAT resulting from the application of this proportion is less than 500 PLN per year. The limit enabling to apply the 100% proportion will be increased from 500 PLN to 10.000 PLN.

Formalities in international trade

• Currently, the right to deduct VAT on the intra-Community acquisition of goods arises only if the taxpayer receives an invoice documenting such transaction within three months from the end of the month in which the tax point arose. If the taxpayer does not receive such invoice within 3 months, he is obliged to reduce the amount of input tax in the settlement for the period in which this deadline expired.
• The proposed amendment liquidates the requirement to receive an invoice related to intra-Community acquisition when deducting input tax. As a result, the input and output tax will be settled in the same settlement period (even if the invoice is not received), and consequently, VAT will be neutral for the taxpayer. Thus, the buyer who does not receive the invoice by the 15th day of the month following the month of the delivery of the goods will show both the input tax and the output tax in the settlement for this period.

Extension of the scope of VAT exemptions

• Currently, management services of investment funds based in Poland are exempt from VAT. The draft extends the exemption to management services for special investment funds defined by other Member States (and thus based in other EU countries).
• The draft also provides for the extension of the exemption from VAT and customs duties for the import of goods for diplomatic missions.

Changes in VAT settlement

• The draft introduces a method of correcting settlements of transactions settled under OSS and IOSS when the taxpayer no longer uses these special procedures. The draft also specifies the rules for allocating chain supplies using the electronic interface.

Changes in issuing invoices

• The taxpayer will not be obliged to issue an advance invoice if he receives payment or part of the advance payment in the same settlement period in which the tax point arose.
• The draft amendment clarifies which exchange rate should be used for corrective invoices. In the case of in-minus corrective invoices, the taxpayer should use the exchange rate applied in the corrected invoice. The draft provides for the possibility of applying one currency exchange rate for a collective in-minus corrective invoice from the day preceding the date of issuing of such invoice.
• In the case of in-plus correction invoices, the taxpayer should use the exchange rate from the day preceding the day when the reason for the correction arises.
• The draft provides for the resignation of the obligation to print fiscal reports and non-fiscal documents from online cash registers (including virtual cash registers).

Reducing VAT penalties

• The draft plans to reduce the VAT penalties from 20% to 10% and from 15% to 5% in the case of correcting the tax return after tax inspection or customs-fiscal inspection. The reduced rate can be applied if the taxpayer will correct all irregularities found by tax authorities.
• SLIM VAT 3 package provides a possibility to resign from the obligatory application of VAT penalties by the tax office (currently the imposition of penalty by the tax authorities is obligatory).

Consolidation and standardization binding information

• According to the draft, Binding Origin Information (WIP), Binding Excise Information (WIA), and Binding Tariff Information (WIT) are to be issued by the Director of KIS. The package also provides the unification of the procedures for issuing, overturning, and changing the Binding Rate Information (WIS) and Binding Excise Information (WIA).

Package SLIM VAT 3 is planned to enter into force in Q4 of 2022. The Ministry of Finance started the pre-consultation of the draft act. Comments and suggestions can be submitted to the Ministry of Finance until 23 February.