VAT groups – new rules of VAT settlements for Polish entrepreneurs

The Ministry of Finance has just launched pre-consultation of the draft amendments to the VAT Act introducing a new solution in the form of the VAT Group into the Polish tax system. The new structure will be available to Tax Capital Groups (PGK) within the meaning of the CIT Act and foreign entities related to these groups, having branches in Poland.

The solution is based on the provisions of the VAT Directive, and with the introduction of the VAT Groups in the Polish legal system, Poland will be the 18th EU country that provides for this form of VAT settlement.

The new solution will constitute a significant simplification for specific taxpayers which may be included in a VAT Group and it will bring many financial benefits to such companies, e.g. in the form of lack of VAT settlements between the entities constituting the VAT Group.

Requirements to be met for VAT Groups:

• existence of financial, economic, and organizational links between the entities being part of the VAT Groups,
• including a provision in the agreement on the establishment of the PGK that the PGK will also be a VAT Group,
• appointment of a representative to represent the VAT Group,
• joint and several liabilities in VAT by the members of the VAT Group,
• the obligation to keep a record of intra-group transactions in electronic form for control purposes.

Benefits for taxpayers that are part of a VAT Group:

• intra-group activities are not subject to VAT,
• filing of one joint VAT return by the parent company, which pays the tax,
• preparing one joint JPK_VAT for the whole group,
• no obligation to issue invoices for intra-group transactions,
• no obligation to apply the split payment mechanism for intra-group transactions.

Unfortunately, VAT Group in the proposed shape is a project intended for a small group of taxpayers – due to the necessity of basing VAT Groups on PGK (currently about 60 entities throughout Poland). However, it should be remembered that the new VAT solution is at the pre-consultation stage, which means that its assumptions may still change.

We will keep you informed about further stages of work on this project.