VAT in the CEE – the most important changes in 2021

Take a look at the changes:

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Poland

SLIM VAT – changes in Poland as of January 2021

SLIM VAT is a package of changes which should make the VAT easy to use, adapted to the local specificity of the country in which it operates.

The SLIM VAT package implements the changes to VAT as of January 2021.

What is changing? Major amendments are easily described below.

Simple invoicing

• The sale invoice corrections „in minus”
  • resignation from the formal condition of obtaining confirmation of receipt of the invoice correction „in minus” from the purchaser,
  • the right to reduce the tax base and the output tax already in the period of issuing the invoice correction „in minus”, provided that the documentation in the seller possession prove that he agreed with the purchaser the transaction terms, for examples: annexes to contracts, business correspondence, proofs of payment as evidence that both parties know and accept the new amended terms of the transaction.

• The sale invoice corrections „in plus”
  • in the case of an increase in the tax base, the correction is made for the period in which the reason for the correction occurred:
    • if the reason for the correction arose in the moment of the original invoice issued – the invoice correction needs to be reported in the month when the tax obligation arose (we have to go back to the original settlement);
    • if the reason for the correction arose later and was not foreseeable at the time of issuing the original invoice for example post-trade changes in prices – then we can report the invoice correction in general in the moment of such changes or in the date of the invoice correction issued.
• The purchase invoice corrections „in minus”
  • in the event of a reduction in the tax base due to a reduction in the price, the return of the goods, return of payment or finding an error in the tax amount on the invoice, the purchaser of the goods or service is obliged to reduce the amount of input tax in the settlement for the period in which the conditions for reducing the tax base for the supply of goods or services have been agreed with the supplier of goods or service provider if these conditions have been met before the end of this accounting period. If the conditions for reducing the tax base for the supply of goods or services have been met after the settlement period in which these conditions were agreed, the purchaser of the goods or services is obliged to reduce the amount of input tax in the settlement for the period in which these conditions have been met.

Facilitations for exporters

• A term to apply the 0% VAT rate on the advance payment in the export of goods is extended from 2 to 6 months.

Common currency exchange rates for VAT and CIT

• The taxpayer is able to choose for VAT purposes the rules of currency conversion as for the income taxes.
• When choosing this voluntary option, the taxpayer will be obliged to use it for a period of 12 months from the beginning of the month in which it was chosen.
• This means simplifying settlements for the entrepreneur and reducing the time to determine the exchange rate to currencies for one transaction.

Expending of the deadline for VAT deduction:

• Extending of the deadline for the input tax deduction on an ongoing basis from 3 to 4 months if a monthly VAT return is submitted. In other words, input VAT can now be deducted in a total of 4 months without having to correct the VAT return.
• After 4 months the right for the input tax deduction still applies, but it already requires the correction of the relevant tax declaration for the period in which the right of VAT deduction arose.  

Split payment clarification

• It was finally clarified that the split payment mechanism applies when the total amount due on the invoice documenting the purchase of goods or services listed in Annex 15 to the VAT Act exceeds PLN 15,000 gross or it’s equivalent expressed in a foreign currency. So far the provision was not clear and aroused a lot of controversies, interpreted in this way that only for an invoice with a value of PLN 15,000 gross or its equivalent expressed in a foreign currency split payment applies.
• In the event of set-off of claims, the provisions on the obligatory split payment mechanism do not apply to the extent to which the amounts due are set off.
• It is possible to pay VAT and customs liabilities for import from the VAT account to customs agencies, or more specifically to a direct or indirect representative (within the meaning of customs regulations) who makes customs declarations for the importer.

Limitation of WIS (binding VAT rate information) validity

• Binding VAT rate information will be valid for a maximum of 5 years from the date of their issue. Upon this time, the taxpayer will be able to request another WIS in the same scope.

Other financial benefits

• The right of VAT deduction from invoices for the accommodation services which are purchased for resale.
• Increasing the limit on the low-value gifts (a free-of-charge transfer) from PLN 10 to PLN 20 net value.

Czech Republic

VAT on the rental of real estate from 1 January 2021

The provision of Section 56a (3) of the VAT Act previously allowed the payer (lessor) to decide to apply VAT on the rent of any real estate to other payers (lessees) for their economic activities, i.e. the rent could have been issued with VAT. The main advantage of this voluntary payment of VAT on the rent was that the payer was entitled to deduct input VAT. With effect from 1 January 2021, a modification has been passed according to which this option is limited in cases where the subject of the lease is immovable property used for permanent housing according to the real estate cadastre (family house, space for living, units without non-residential space other than a garage, cellar, or storage room, constructions for which at least 60% of the floor area consists of living). In the case of the lease of these immovable property newly listed in Section 56a (3) of VAT Act, the landlord must always exempt the rent from VAT (without entitlement of VAT deduction), therefore the landlord will no longer be entitled to deduct input VAT. Therefore, if the landlord has in the past claimed the right to deduct input VAT paid on the purchase of the real estate or its technical improvement, and the ten-year period for adjusting the tax deduction has not expired, it is obliged to adjust the input VAT claim. The given change will only affect the rental of real estate intended for housing according to the cadastral registers.

An exception from this exemption is applied for example to the short-term rental of real estate, provision of accommodation services, which correspond to the numerical code of the production classification CZ-CPA 55 as amended on 1 January 2008, rental of premises and parking spaces, etc.

Slovakia

VAT bad debt relief

The supplier may correct the tax base in case of total or partial non-payment after the supply of goods or services takes place when receivable due cannot be collected.

Extension of the options for proving the export of goods outside the EU.

Importation of consignments from third countries not exceeding EUR 22 is no longer VAT exempt.

Hungary

Grace period for the extended real-time reporting

As of 1 January 2021 the scope of invoices reported in real-time to the tax authorities is expanded – for invoices issued to taxable persons on EU and non-EU transactions, for domestic invoices in B2C transactions, export and intra-Community supply of goods and services transactions, independently of the amount of VAT charged.

Introduction of the XSD 3.0 schema

Detailed reporting obligations forced tax authority to publish the updated XSD 3.0 schema including some adjustments, such as data privacy measures for B2C invoices. Due to the current COVID-19 situation, taxpayers are required to submit the new version of the XML file, nevertheless, failure to comply with this obligation shall not result in the imposition of a penalty.

Therefore, the authorities established the transitional period when taxpayers may use both current XSD 2.0 and the new XSD 3.0 schema from 1 January 2021 to 31 March 2021. As a result, all the taxpayers will be required as of 1 April 2021 to use the updated schema and the previous version will be no longer valid. The online invoice 3.0 system and the related data reporting format will enable draft VAT returns, paper-free invoicing and data security all at the same time.

E-Commerce package in the EU

E-commerce simplification as of July 2021  – the special regime of one administrative place will be extended to the distance sales

The amendment to VAT regulations concerning cross-border electronic commerce (so-called e-commerce package) is based on the Council of the European Union project, which will be effective from 1 July 2021 throughout the European Union. The changes will mainly affect traders selling goods to final consumers established in the other EU Member States. The sales limits, beyond which these transactions may be taxed in the EU country where the taxpayers have a seat, will be drastically reduced. Currently, the limits are calculated separately for each EU Member State of destination and range between EUR 35,000 to EUR 100.000. After the amendment, the limit will be reduced to only EUR 10,000 and will cover all EU Member States in total for distance selling of goods and services to non-businesses throughout the EU.

In consequence, the effect of the change will force many of the entrepreneurs to register for VAT in the country of sale destination. Nevertheless, as of July 2021, the new VAT regulations extended the scope of the special “single point of administration” regime for the collection of VAT on the distance selling of goods and the provision of cross-border services to final recipients (non-businesses) from the EU. In general, online suppliers up to the limit EUR 10,000, will tax these supplies in the State where has a seat, and thus always invoice with local tax. If the above-mentioned limit is exceeded, they will not have to register for VAT and comply with their obligations in each EU Member State where they sell goods in B2C transactions as it is now but can file returns and pay VAT on transactions in all EU Member States via their home online portal in the new VAT-OSS procedure as an opportunity. VAT-OSS procedure is an extension of the MOSS procedure, currently applicable to telecommunications services, radio and television broadcasting services and electronically supplied services.

It is worth stressing that the voluntary special VAT regime for selected entities, simplification consists in the possibility of submission only one VAT return for all EU deliveries. This opportunity not only excluding mandatory VAT registration but also will reduce the related administrative inconvenience in each EU Member State.

If you have any doubts about the new regulations, please do not hesitate to contact us: