Big VAT Amendment Signed by the President | SSW Tax Alert 15-2016

The so-called big amendment of the VAT Act will come into force as of 01 January 2017. The Act has already gone through the complete legislative process and has been signed by the President.

The key change from the taxpayer's perspective is the reinstatement of the so-called VAT sanctions which the authorities will be able to impose on taxpayers who fail to correctly account for their VAT liabilities. The following measures will be available:

• A sanction corresponding to 30% of the amount of the understated tax liability or overstated refund.

This sanction will apply, inter alia, in case when the tax liability disclosed in the tax return is lower than the amount actually due, and when the taxpayer does not file the tax return or does not pay the amount due in respect of the tax liability. If, after the audit, the taxpayer acknowledges the findings of the audit authority, corrects the tax return and pays the amount of the tax liability, the amount of the additional liability will be reduced to 20% of the shortfall amount. The sanction is not to be applied at all when the taxpayer corrects the return or files an unfilled one prior to the beginning of the audit, and in case of “obvious errors”, or when the input or output tax due is recognised, albeit in an incorrect period.

• a sanction equivalent to 100% of the amount of the understated tax liability or overstated refund.

Such a restrictive sanction will apply in case when the understatement of the liability amount results from invoices issued by a non-existent entity, or invoices evidencing an action which actually was not performed, or state amounts which are not true. Additionally, the sanction will apply in case of invoices which evidence an action which is absolutely invalid, or apparent actions (within the meaning of Articles 58 and 83 of the Civil Code). Based on our experience, however, we see a major risk that such allegations may be used in typical business relationships, and that a broadening interpretation of the provisions concerning the 100% sanction may be applied.

The amendment provides also for a number of novel solutions which aim at improving the VAT collection (so-called package of sealing solutions). The key provisions in this regard include:

• Significant expansion of the catalogue of transactions covered by the reverse-charge procedure.

As of 1 January, this settlement method will apply to the provision of B2B construction services in general, if the service provider acts as a subcontractor. On the other hand, as far as the trade of goods is concerned, the catalogue of goods covered by this procedure will be expanded to include processors and certain forms of silver, gold, platinum and other precious/non-precious metals listed in the annex to the VAT ACT.

• The broadening of the joint and several responsibility for VAT liabilities (i.e. expansion of the catalogue of transactions in case of which the purchaser may be jointly and severally responsible together with the seller for their tax liabilities).

The lawmakers decided to expand the above-mentioned catalogue by adding certain electronic goods, i.e. hard disks (HDD disks), semiconductor memories (SSD disks) and stretch film (used e.g. for wrapping pallets).

• The broadening of the requirements in respect of the security deposit which, when provided by the seller, releases the buyer from the joint and several responsibility with the seller for their tax settlements.

The Act introduces a new requirement, according to which, in order to enjoy immunity from joint and several responsibility, the taxpayer must authorise the bank/credit union to provide information on all the transactions performed on the account indicated in the identification entry form to the relevant authorities.

• Significant restriction of the group of taxpayers authorised to file VAT returns on quarterly basis.

As of 1 January 2017, the quarterly settlement will be available to the so-called small taxpayers only (i.e. those whose sales revenues in the preceding year do not exceed EUR 1.2M). The right to quarterly settlement will also be excluded for new taxpayers for the period of 12 months of the date of their registration as VAT payers.

• Introduction of additional conditions for the eligibility to VAT refund within 25-day time limit.

The accelerated refund will be available exclusively to taxpayers registered as active VAT payers who submitted VAT returns for the period of 12 months prior to the submission of the relevant application. Additionally, the refund within 25 days will be available provided that the amount of the input tax results from invoices paid through a bank account held at a bank based in the territory of Poland, or in a credit union. As far as other invoices are concerned, the accelerated refund will be available only when the aggregate amount of the related receivables does not exceed PLN 15.000. Furthermore, the accelerated refund option has been disabled in case when the amount of tax carried forward from the previous return exceeds PLN 3.000.

• Expanded scope of verification in case the examination of the legitimacy of VAT return.

The verification of the legitimacy of the return of the difference between input and output tax may involve the examination of the taxpayer's accounts, accounts of other entities involved in the trade of goods or services which are recognised in the taxpayer's accounts, and the verification of the consistency of these accounts with the actual transaction.

• Introduction of additional requirements concerning VAT registration.

The authority will not register an entity as a VAT payer if, despite documented attempts, it is impossible to contact the entity or its attorney, or the entity or its attorney do not appear upon being called. Importantly, the above circumstances may also constitute a basis for the removal of a taxpayer from the register of VAT payers. The taxpayer may also be removed in case when they, e.g., suspend their business activity for the period of at least 6 consecutive months, fail to submit returns for 6 consecutive months, or when they issue invoices or corrective invoices which do not document actual transactions. In addition, the Act introduces joint and several responsibility of the attorney who had registered the taxpayer for such taxpayer's tax arrears arising within 6 months of the registration.

Should you be interested in more detailed discussion of the above changes, or in establishing their impact on your business activity, please do not hesitate to contact us.

Written by:

Łukasz Karpiesiuk, Partner, Tax Advisor