September 24, 2021
VAT aspects of Poland's proposed tax reform discussed
On 8 September 2021, representatives of the Polish Government submitted draft legislation to the Polish Parliament on the major tax reform referred to as the “Polish Order." The changes would affect several areas of taxation including Corporate Income Tax (CIT), Personal Income Tax (PIT), and Value Added Tax (VAT). A majority of the provisions are expected to come into force as of 1 January 2022.
The draft legislation will now be discussed in Parliament. Their potential impact should be assessed by businesses in order to prepare for change and undertake necessary action.
This Alert summarizes the VAT-related measures.
VAT grouping introduced
The draft law introduces the possibility of joint settlements by taxpayers within VAT groups. A VAT group may be created by entities that are connected financially, economically and organizationally. In order to set up a VAT group, interested entities must take the following three steps:
After the creation of the group, the group entities will become a single taxpayer for VAT purposes.
While there are many advantages to forming a VAT group, companies should consider the options and all the possible consequences that could arise, before applying for this arrangement.
Taxation of financial transactions
The draft amendment introduces the possibility for a taxable person to opt for taxation of exempt financial services provided to 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:
For more details of this proposal, see EY Global Tax Alert, Poland introduces VAT option on financial services to be effective 1 January 2022, dated 1 July 2021.
Introduction of quick VAT refunds for non-cash taxpayers.
In cases determined by the Act, VAT reimbursement will be made within 15 days. This possibility will be subject to a number of conditions, including, among others, the requirement that in the taxpayer's settlement with the VAT amount to be returned within 15 days, the amount of input VAT surplus to be transferred to the next settlement period shall not exceed PLN3,000.
For additional information with respect to this Alert, please contact the following:
EY Doradztwo Podatkowe Krupa sp. k.