Further changes in the Polish VAT Act

SLIM VAT 2

SLIM VAT 2 is another set of changes that are supposed to simplify the VAT settlements in Poland. The first one was implemented as of 1 January 2021. New regulations include, among others:

• The extension of time in which the bad debt relief can be claimed from two to three years and deletion of certain conditions which shall be met to claim this relief in accordance with ECJ’s judgement in case C-335/19.
• There will be more refining changes to the triangular transaction scheme. The purpose is to introduce rules which, in cases of exports or intra-community supplies, will clearly specify which supply is the one to which the dispatch or transport should be ascribed where the transport is arranged not by a customer who also supplies the goods or an intermediary operator, but by the first supplier (first operator in the chain) or the last customer (last operator in the chain).
• Having been challenged by ECJ in case C-895/19, the regulations on the use of the so-called “spaced array” (szyk rozstawny) for deduction of VAT on intra-community acquisitions and imports (input VAT recognised separately from output tax) are going to be repealed.

SLIM VAT 2 entered into force on 1 October 2021; the “spaced array” regulations already became effective one day after publication (7 September 2021).

More details on the VAT groups in Poland

A bill passed by the Minister of Finance, Funds and Regional Policy concerning amendments to the tax legislation introducing the “Polish Deal” (Polski Ład) was published on 26 July 2021. The key change regarding VAT is the possibility to form so-called VAT groups for tax purposes as of 1 January 2022.

The main aim of a VAT group is that all members handle their tax compliance duties for VAT purposes together, while intra-group transactions are not subject to VAT. The participation in VAT groups is to be optional.

VAT groups can be set up by taxpayers being related financially, economically and organisationally to each other as defined by the amendments to the VAT Act, if:

• being established in the territory of Poland or
• not being established in Poland – to the extent they conduct business through a branch located in Poland.

Therefore, the possibility to establish a VAT group will not be connected with participation in a “tax capital group” (PGK) governed by the CIT Act.

To create a VAT group, a written agreement must be concluded in which the entity chosen to represent the VAT group will be indicated. The VAT group cannot be created for a period of less than 3 years. Moreover, during the existence of the VAT group, members of the group cannot be changed. This means that the structure of the VAT group shall remain the same.

Read the WTS Global VAT Newsletter here.