It is 4 May 2021. We invite you to the next episode of the “Weekly Tax Review” prepared in cooperation with tax experts in KPMG in Poland.

In today's episode:

  • Tax explanatory notes concerning SLIM VAT
  • VAT e-commerce package
  • Limited partnerships are CIT-taxable
  • Digitization of TAX-FREE documentation as of 2022
  • Possible amendments to the split payment mechanism in VAT

Tax explanatory notes concerning SLIM VAT

On 23 April 2021, the Ministry of Finance issued the final version of tax explanatory notes concerning a suite of amendments to the Polish value-added tax scheme, commonly referred to as the SLIM VAT package. Compared to the original version, the latest explanatory notes were extended with many additional examples. They also clearly state that the new regulations on correcting VAT credit notes can be equally applied to correcting invoices issued for natural persons not conducting business activity. Moreover, the Ministry noted that choosing a particular method of currency conversion in VAT will not be treated as a tax arrangement/scheme under MDR.

VAT e-commerce package

In April 2021, the Council of Ministers passed a suite of amendments to VAT regulations, jointly referred to as the VAT e-commerce package, the goal of which is to, inter alia, facilitate VAT settlements related to cross-border sales of goods to consumers. The amendments are expected to enter into force on 1 July 2021 and are to enable VAT payers selling goods purchased in other Member States to settle VAT due on the sale of goods to consumers in other EU countries by means of a solution referred to as the One Stop Shop. Once the new regulations become applicable, a taxpayer selling goods to consumers in other Member States will not be required to register in each country to which they ship their goods. However, simplifications related to VAT settlements will be available only where the goods purchased by consumers are shipped from one EU Member State (the country where the goods are stored) to another (the country where the goods are received by the consumer). If the goods sold are stored in the purchaser’s country, the sales will fall into the category of domestic sales in the territory of a given Member State. Thus, the location where the goods are stored before being sold to a customer is of key importance for correct VAT settlement.

Limited partnerships are CIT-taxable

Under the amended income tax acts, as of 1 January 2021, CIT obligations were extended to cover limited partnerships, unless they decided to delay it until 1 May 2021. Consequently, on 1 May 2021 all Polish limited partnerships became subject to CIT. Change in the status of limited partnerships means that the income generated by limited partnerships, which under the previously applicable regulations was taxed only at the level of partners, is now subject to taxation at the company’s and then at the partners’ level. Yet, the income of general and limited partners derived from their share in the partnership’s profits, but earned before the partnership became a CIT payer, is to remain taxed on the previously binding rules, which means that the profits made by a partnership before it was covered with CIT obligations is to remain subject to the previous regulations, even if paid out at a later stage.

Digitization of TAX-FREE documentation as of 2022

On 28 April 2021, an announcement and a presentation on the new VAT refund system for travellers without permanent residence in the EU (commonly referred to as the TAX-FREE scheme) were published on the website of the Ministry of Finance. Currently, the scheme relies on paper documents and receipts, which must bear a seal confirming that the goods are to be shipped outside EU. Starting from 1 January 2022, however, all sellers applying the TAX-FREE scheme will be required to issue electronic documents.

Possible amendments to the split payment mechanism in VAT

The Ministry of Finance announced that it considers lowering the threshold, over which VAT split payment mechanism must be obligatorily applied. Currently, the limit is PLN 15k, with the use of the split payment mechanism remaining voluntary for all the transactions below it. Now, the Ministry thinks about removing the threshold and extending the split payment mechanism to all VAT invoices, regardless of their value and type of goods or services they relate to. Before any amendment is made, the Ministry of Finance is to put out the project for consultation with the business community. Still, details on the possible changes, including the date of making amendments available for consultation, remain unknown.