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July 2, 2021
2021-1302

Poland introduces VAT option on financial services to be effective 1 January 2022

The Polish Government recently published a draft of the new Value Added Tax (VAT) law amendment (draft amendment). The draft amendment provides for the introduction in Poland of the possibility for a taxable person to opt for taxation of financial services provided for VAT taxable persons in B2B transactions (business to business).

Financial services provided to non-taxable individuals, i.e., retail customers, will continue to be obligatorily exempt from VAT. The proposed legislation, if enacted, would come into force on 1 January 2022.

Based on the text of the draft, taxpayers will be able to waive the exemption for the following financial services:

  • Transactions, including intermediation, concerning currency, bank notes and coins used as legal tender
  • Fund management
  • The granting of credit or money lending and the intermediation of credit or money lending services and the management of credit or money lending by the creditor or lender
  • Surety, guarantee, and any other security in connection with financial and insurance transactions, and the intermediation of such services and the management of credit guarantees by a creditor or lender
  • Cash deposit services, maintenance of cash accounts, payment transactions of all kinds, money orders and money transfers, debts, checks and bills of exchange, and the provision of intermediation services in relation to these services
  • Services, including intermediary services, involving shares in companies or entities other than companies if they have legal personality
  • Services involving financial instruments and the provision of intermediation services in respect thereof

Due to the limitations resulting from the European Union Directive, the option to tax would not be applicable for insurance services.

A taxable person who makes use of the proposed option will be required to tax all the financial services listed in the Act which are provided to VAT taxable persons. Thus, taxpayers may not waive the exemption for selected services only.

According to the draft amendment, a taxpayer who waives the exemption will be bound by its choice for a period of two years. After this period, the taxpayer could apply the exemption again in transactions with other taxpayers.

The upcoming change would first and foremost provide greater VAT neutrality in the financial sector. Taxable persons exercising their right to opt for taxation of their financial services would also be able to exercise their right to deduct input VAT related to taxable (financial) services, thereby reducing the cost of their activities in this respect.

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For additional information with respect to this Alert, please contact the following:

EY Doradztwo Podatkowe Krupa sp. k.

 

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