The changes primarily concern VATable persons that provide telecommunication, transmission and electronic services to non-VAT payers.  Some of the rules regarding the registration obligation with respect to transactions carried out with the use of cash registers have also been modified.  Most probably, there will be some further changes in VAT this year – on 14 January 2015 the Polish Seym received a draft of new VAT amendments.   According to the Seym agenda, the first reading of the draft will take place on 04 - 06 February 2015.

 

Amendments that are binding as form January 2015

VAT payers that provide telecommunication, transmission and electronic services B2C to non-VAT payers whose place of residence (registered office) or permanent place of stay is located outside Poland need to prepare themselves for adjustments needed to accommodate new VAT rules. The method of determining the place where such services are provided has changed, and the changes are not limited to Polish regulations – they have been necessary due to modifications introduced at the EU level.    

 

Until now enterprises that rendered such services to non-VAT payers were obliged to calculate the output tax on the services according to the rate applicable in the country of their registered office, regardless of where the final recipient resided.  Beginning from 01 January 2015 providers of telecommunication, transmission and electronic services have to calculate VAT based on the rate applicable in the country of the final recipient’s registered office, permanent place of residence or stay, and tax the services in that country.  In spite of many simplifications, guidelines and explanatory statements issued for the benefit of taxpayers in the form of non-binding explanatory notes and the introduction of a detailed procedure aimed to facilitate VAT settlements under other EU tax regimes with the help of the so-called VAT Mini One Stop Shop, it seems that the introduced changes are the source of unrelenting doubts, both for taxpayers and for tax authorities.

For some VAT payers, i.e. doctors of medicine, lawyers, tax advisors, beauticians and hairdressers, the beginning of 2015 was associated with the need to purchase cash registers, since now they are under an obligation to use cash registers to record the services rendered to clients that do not run business or are not lump-sum farmers.  As from January 2015 the supplies of perfumes and eau de toilettes, car repairs, wheel and tyre changes as well as MOTs and vehicle technical inspections also have to be recorded with cash registers.

  

The cash register exemption for service providers where the number of services does not exceed 50 and the number of recipients is lower than 20 has been removed too – such entities will be obligated to use cash registers beginning from 01 March 2015.  

 

Generally, in consequence of these amendments more entities will be obliged to use cash registers in their activities.   

At the same time, supplies of services and goods that – pursuant to the corporate income tax regulations – are treated as fixed and intangible assets subject to depreciation/ amortisation will not need to be recorded with the use of cash registers, providing they are documented with the appropriate VAT invoice. 

 

The provisions according to which transactions focused on real property or supplies of goods and services treated as fixed and intangible assets will not be included into the turnover that is taken into account when releasing the taxpayer from the obligation to use cash registers should be regarded as a favourable modification. 

 

Further changes proposed for 2015

 

The changes to the VAT Act proposed by the Council of Ministers for this year (with 01 April 2015 as the planned effective date) generally do not introduce taxpayer-friendly solutions. Apart from the modifications concerning the so-called bad-debt relief or the joint and several liability, the draft amendments tabled for discussions in Seym extend the scope of Appendix No. 11 to the VAT Act which provides a list of goods subject to the reverse charge mechanism, to include, among others, laptops and mobile phones, inclusive of smartphones.    As a consequence, in line with the current wording of the draft regulations, the purchaser that is an active VAT payer will need to tax purchase transactions focused on the goods above, if their value under an economically uniform transaction exceeds the amount of PLN 20 thousand.   

 

What is more, the draft regulations introduce an obligation to submit recapitulative statements regarding transactions covered by the reverse-charge mechanism and carried out in domestic trading.  In result, if transactions subject to reverse changing occur, the taxpayer will be obliged to file additional VAT forms within the timeframes allowed for VAT filings.   

 

Further changes effective from 2016 – VAT prefactor

 

The draft amending act also contains a proposal to change the provisions that regulate input tax deductions on purchases of goods and services used for mixed purposes, i.e. both for business activity and for other purposes. These changes are associated with introducing the so-called VAT prefactor, the application of which would precede the application of the standard VAT factor. Changes in this respect may prove especially significant for the public sector, including municipalities, poviats and provinces as well as schools of higher education and sole proprietorships if the activity other than business-related (e.g. carried on for purposes other than bringing profits) fills a crucial role in their overall business activity. The above new rules are planned to be introduced with effect as from 2016.

 

However, it seems that at this stage the intended changes need to be taken with a pinch of salt, because in practice it often happens that the wording of draft legislation is modified in Seym, even though it cannot be excluded that the amending act will be passed in a form similar to the one proposed by the Council of Ministers. For that reason close tracking of the scope of potential changes and their effective date may prove significant for the entrepreneurs that the changes will directly apply to.   

 

Katarzyna Wieczorek-Puławska

Tax advisor, Senior Consultant, Deloitte office in Szczecin