A couple of important changes of the Polish VAT Act came into effect 1st January 2017. The main purpose of the changes is to ensure greater stability of the VAT system by reducing tax frauds and tax abuses. The 4 main changes are described below.
1. Extension of reverse charge mechanism to construction services
As of 1st January 2017 the reverse charge mechanism covers certain types of construction services provided to VAT registered taxpayers in Poland. It means in practice that both Polish and foreign subcontractors providing construction services in Poland shall issue invoices without Polish VAT. This VAT (both output and input) shall be calculated and reported by purchasers. Please note that the purchaser will not have the right to deduct the VAT that is incorrectly charged by the supplier. I recommend the foreign companies to analyze their activities carried out in Poland (e.g. by review of the contracts) in order to verify whether the new rules affect their business.
2. Electronic submission of VAT returns
The obligation to submit VAT returns electronically will be introduced as of 1st January 2018. However, for certain entities this obligation exists already as of 1st January 2017. This applies to:
- taxpayers who are obligated to register for intra-Community transactions;
- purchasers or suppliers of goods and services which are subject to the reverse charge mechanism;
- taxpayers obligated to submit VAT returns electronically according to the Polish income tax provisions.
This implies that the foreign companies should appoint a Polish proxy to submit e-returns on their behalf. I would recommend the Norwegian companies to use the Polish VAT representative for submission of e-returns. Alternatively, the foreign tax payers should gain access to the IT system of the Polish Ministry of Finance. Please note however that it is not so easy for foreigners since a Polish national identity number is needed.
3. Automatic de-registration from Polish VAT register
According to the current Polish VAT law, the tax authorities may de-register an entity as a VAT taxpayer if the entity does not exist or it cannot be contacted. As of 2017, the tax authorities can de-register an entity without notification also in following cases:
- submission of untruthful information in its VAT registration form;
- the taxpayer or its agent does not respond to summons;
- suspension of business activity for at least six consecutive months;
- failure to submit VAT returns for a period of six months or two quarters;
- submission of nil-VAT returns for a period of six months or two quarters;
- issuance of invoices confirming transactions that did not take place.
Please note that automatic de-registration of an entity registered for intra-Community transactions may also take place if a taxpayer fails to submit EC Sales List (returns informing about performed intra-Community transactions) for a period of 3 months.
Due to these strict requirements, I recommend the foreign companies to have an active and constructive dialogue with its Polish VAT representative.
4. Additional VAT liability (penalties)
An additional tax liability in the amount of 30% will be introduced in the case of:
- reporting too low amount of the output VAT;
- reporting too high amount of the input VAT;
- failure to submit VAT returns and payment of the VAT liability.
The amount of the penalty may be reduced to 20% provided that the taxpayer submits a correction of the VAT return or the missing VAT return in appropriate terms. This special penalty will not be applied if the taxpayer submits a correction of the missing VAT return before a tax audit is initiated.
Moreover, an additional sanction (amounting to 100% of the input VAT deducted) may apply to the taxpayers that deducted VAT using false invoices, invoices that were issued by a non-existing entity or invoices that confirm fraudulent or criminal activities. Due to implementation of the new sanctions, it is crucial to take particular care on invoicing procedures in the company to mitigate the risk of becoming involved in potential fraud.
Jeg heter Diana Geilhufe og kommer fra Polen. Jeg jobber som manager i Advokatfirmaet PwC. Mitt arbeidsfelt er merverdiavgift, med særlig fokus på internasjonale forhold og cross border transactions. Til daglig jobber jeg med å bistå norske og utenlandske virksomheter med blant annet rådgivning, strukturering og spørsmål knyttet til rapportering av merverdiavgift. Jeg har arbeidet i PwC siden 2010, først 5 år for PwC i Polen før jeg begynte i PwC Norge i 2015.
Målet mitt er å spre kunnskap om merverdiavgift og dele mine internasjonale erfaringer. Ta gjerne kontakt med meg dersom det er noe du lurer på.
My name is Diana Geilhufe and I work as Manager at PwC Tax and Legal Services. My area of expertise covers international VAT advisory service. I assist clients with assessment of VAT obligations in Norway as well outside Norway. I specialize in analysis of cross-border transactions, including restructuring of supply chains from the VAT perspective. I have been with PwC since 2010, first 5 years at PwC in Poland before joining PwC Norway in 2015.
I would like to blog about my international experiences in this area. Please feel free to contact me, if you have any questions, comments or input.