On 11 December 2018, the European Commission announced new solutions to fight VAT fraud and improve VAT collection in the EU. From 2021 online marketplaces using their platforms will have to make sure the VAT from sales by non-EU companies to EU is collected if it is done through their platform. If the VAT will not be collected, they will become liable for this unpaid tax. It is expected the Member States will agree for the changes in 2019. Additionally the European Commission proposed obligation for Payment Services Providers to report payments concerning online sales to track sellers evading VAT payments.
Poland has again postponed the reintroduction of the retail sales tax till the end of 2019. The tax had been already introduced in September 2016 however due to the European Commission (EC) decision it was withdrawn. The Polish government did not agree with this decision and filed a complaint to the Court of Justice of the European Union (CJEU) but the dispute has not been settled yet.
Member States should apply the Anti Tax Avoidance Directive as from 1 January 2019.
On 28 January 2016 the Commission presented its proposal for an Anti-Tax Avoidance Directive as part of the Anti-Tax Avoidance Package. On 20 June 2016 the Council adopted the Directive (EU) 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market.
In order to provide for a comprehensive framework of anti-abuse measures the Commission presented its proposalSearch for available translations of the preceding link on 25th October 2016, to complement the existing rule on hybrid mismatches. The rule on hybrid mismatches aims to prevent companies from exploiting national mismatches to avoid taxation.
In addition to the proposal the Commission also published its Staff Working DocumentSearch for available translations of the preceding link.
The Anti-Tax Avoidance Directive contains five legally-binding anti-abuse measures, which all Member States should apply against common forms of aggressive tax planning.
Member States should apply these measures as from 1 January 2019.
On the 2nd October 2018 Ecofin (Economic and Financial Affairs Council) adopted a draft directive introducing changes to the VAT system.
They changes will take place in two stages.
The first one assumes:
1) new rules for settlement of call-off deliveries,
2) recognition as a material condition for the application of the 0% rate provision of the buyer’s VAT number
3) simplification in the settlement of chain transactions
4) simplification in the internal delivery documentation
These first regulations will have to be implemented by the end of 2019.
The second stage of VAT reform at the international EU level assumes a fundamental change of the entire VAT system. According to the proposal the transactions would be taxed in the country to which the goods are delivered, i.e. in the country of destination. This would be a huge change.
Example – if the Polish taxpayer sends the goods to the Czech Republic, then this transaction would be taxed in the Czech Republic, thus the possibility of offenses and frauds which are based on the possibility of declaring the 0 percent rate for sale and getting a refund of input tax would be eliminated.
VAT was introduced in the 1960s, and since then VAT frauds have been slowly evolving, which ECOFIN proposes to prevent. In Poland the VAT Gap is currently decreasing but still is high in comparison to other countries e.g. Denmark, the Netherlands. In some countries e.g. Romania the gap is still huge on the level of 36%.
This situation triggered process of changes and it seems VAT rules in the current form will soon become obsolete.
The changes in VAT would be based on a single, targeted tax system. It is assumed to be implemented by 2022.
It is worth mentioning that in Poland works on the central invoice database have been resumed.
Split payment has already been introduced in Poland – the system operates also in e.g. the Czech Republic, is expanded in Italy, and the United Kingdom wants to introduce a split payment in trade with non-taxable persons.
The planned changes in Polish Social Security Act are going to abolish top limits on social security contributions (pension and long-disability insurance). It will have a negative impact on employee salaries and labour costs incur by an employer. The draft regulations have been already voted in the parliament, however the changes have been referred to the Constitutional Court before the new act was signed by President. The planned effective date of the act is 1st January, 2019, however keeping this date is doubtful as the case will not be recognized by the court rapidly.
The current annual amount of the pension and the long-disability insurance (hereinafter SS contributions) that amounts to 19,52% (pension insurance payable at 9,76% both by employer and employee) and 8% (long-disability insurance payable at 8%, 6,5% by employer and 1,5% by employee). The SS contribution base shall not exceed in a reporting year the amount corresponding to 30 times the projected average monthly remuneration (so-called thirty-fold limit) in the national economy. The social security law allows the Polish employers to stop charging monthly SS contributions after their income exceeds PLN 133 290,00 (2018). This benefits that after reaching this limit, an employee gets more net salary (which partly compensate the higher Personal Income Tax threshold), and an employer has lower labour costs.
However, if the regulation enters into force, the SS contributions will be calculated due on total income. In consequence of this labour costs of the employer increase, and the workers will earn less money.
Having the above in mind, entrepreneurs are wondering how they could prevent negative consequences both for themselves as well as for its employees. From the solutions employers are currently considering we can list as follows:
1. change of the relationship with the employee from the contract of employment or civil contract to the provision of services within sole-trader or single shareholder ltd company towards the current employer
2. increase remuneration as a compensation of the employee net loss
The employers must however, bear in mind that there is no a perfect solution. Considering the above examples, the first one is burden with risk that the shift of the relationship will be recognized by Polish authorities as an attempt of SS avoidance, which may result with court disputes, while the second solution may be treated only as a relief for employees, which increase the labour costs even more.
UPDATE November 15th, 2018
Yesterday (November 14th, 2018), the Constitutional court ruled that proceeding of amending the act on amending the social insurance act by Polish parliament was incompatible with the constitution, and therefore the law was declared unconstitutional, which means that in this case, the new law does not have legal effects.
The Associations Conference Forum (AC Forum) – European network of NGOs – is organizing for September 27th and 28th its “International VAT workshop” that will be held in Lausanne.
Trusted TRA Members La Répresentation Fiscale (France), Tax Partners (Spain) and Studio Cassinis (Italy) will host the two days workshop.
Mr. Donato Raponi, Former Head of Division VAT and other Turnover Taxes at the European Commission will enhance this event with his presence by talking about the near future of the EU VAT system.
The conference part of the workshop will provide advice and guidance on VAT issues faced by non-profit organisations involved in congress and events management within the EU.
Breakout sessions will provide opportunities to share experience and know-how while discussing case studies and questions submitted by the participants in depth.
From 1 July 2018, all taxpayers, regardless the size are obliged to provide additional SAF-T files at the request of tax authorities during VAT proceedings, verification activities or tax and custom audits. These SAF-T reports can be transferred using the same application, by means of which VAT SAF-T files are sent or delivered on USB stick, CD/DVD or other data carriers.
The additional SAF-T files include:
– accounting books – JPK_KR
– bank statements – JPK_WB
– warehouse – JPK_MAG
– VAT invoices – JPK_FA
– tax revenue and expense ledger – JPK_PKPIR
– evidence of revenues – JPK_EWP
The taxpayers will generally have not less than three days to provide the additional SAF-T files. Exact date will be stated in the letter from the tax auditors, however, in justified cases (e.g. large amount of data, absence of a responsible person) a taxpayer will be entitled to ask the tax authorities to extend this deadline.
The additional structures have been introduced to significantly speed up the tax audits and to reduce the need to visit the tax office by the taxpayers as well as to minimize the visits of the tax inspectors at the company’s headquarters.
You can find here more information about the XML structure and data required for this obligation.
The minimum tax in Poland on commercial real estate has been introduced in 2018.
It is income tax, which must be paid by owners of commercial properties worth more than PLN 10 million. Although these regulations are new, there are plans to amend them. This is the effect of consultation with the European Commission (EC).
The changes will be introduced in a few areas.
1.Liable to taxation will be only the buildings that are used under a rental, lease etc. agreement. Buildings not meeting the criteria will not be taxable. This beneficial solution would also apply to the minimum tax already paid in 2018.
- 2.The method of applying the threshold of PLN 10 million to which the minimum tax does not apply, will be different. After the changes, there will be one free amount for a taxpayer, not for every building.
- 3.The minimum commercial property taxes in Poland will be applicable for all buildings being rented or leased including hotels, warehouses and residential buildings, with an exemption for residential buildings connected with government programs related to social housing.
4. Special anti-tax avoidance clause regarding the minimum tax will be introduced- transfers made solely for the purpose of avoiding the commercial property tax in Poland will not be accepted by the tax administration.
Read mor about Property taxes in Poland
Polish banks have opened a dedicated VAT account for all theirs clients (“VAT Account”) to reflect this change.
The accounts owners do not need to take any action in connection with these changes and will not need to inform its customers of new standard settlement instructions. The payment will be split automatically if that option is chosen by customer so that the net amount of the payment is applied to existing account and the VAT amount is applied to VAT Account.
The Polish government encourages the use the new solution.
However, it is worth remembering, in principle the transfer from the VAT account is possible only to another VAT account or to the account of a tax office.
In 2018, we at INTERTAX Company entered our 25th year as a tax advisory & accounting company.
In 1993, INTERTAX was founded under the guiding mission of helping companies doing business in Poland.
Now, twenty five years later, this ensemble of 23 people is still united around the same vision. Our goal is to provide our clients with the best possible solutions and services suited to their individual needs.
25th Anniversary Celebration on Saturday, August 11th 2018 – a walk from the office to restaurant accompanied by Leliwa Jazz Band