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September 24, 2021
2021-1729

VAT aspects of Poland's proposed tax reform discussed

Executive summary

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.

Detailed discussion

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:

  • Conclude an agreement for a VAT Group
  • Appoint a representative for the VAT Group
  • Submit a registration application and agreement to the tax office competent for the representative of the VAT Group

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:

  • 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

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.

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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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