On 11 March 2005 Parliament adopted a number of changes to the Polish VAT Act. Most of the amendments came into force on 1 June 2005. This article presents selected amendments to the VAT Act which in the author’s view are of the utmost importance for Polish taxpayers.
Supply of goods for representation and advertising purposes
The amendment to the VAT Act contains changes in respect of the VAT treatment of gifts with a small value, samples and printed advertising and information materials provided by the taxpayer to its customers (or potential customers). According to the new regulations, gifts of a total value which does not exceed PLN 100 in a given year which are transferred to a single person are not taxed with VAT, provided that the taxpayer maintains records which allow the identity of the persons to whom the gifts were provided to be determined. In the absence of such records only gifts with a value not exceeding PLN 5 are not subject to VAT.
VAT is not levied on the transfer of printed advertising and information materials as well as samples. A sample in the light of the new regulations is a small amount of goods which represents a specific type or category of goods, and which maintains the composition and all the physical, chemical and physical-chemical qualities of the goods, while the value of the samples provided by the taxpayer does not indicate an activity of a commercial nature.
Deduction of VAT on the purchase of cars
Taxpayers who purchase cars with a maximum total weight not exceeding 3.5 tons can deduct 60% of the VAT specified in the invoice, but no more than PLN 6,000. Nevertheless, the provisions stipulate the taxpayers’ right to the full deduction of input VAT charged on the purchase of cars with a total weight of up to 3.5 tons, if the vehicles meet the conditions stipulated in the Act. Meeting the said conditions must be confirmed by a motor vehicle inspection point, within the deadline for the closest technical check, but not later than within 12 months counted from 1 June 2005.
Definition of the taxpayer
Individuals who perform tasks on the basis of contracts of mandate and specific work contracts and at the same time remain in an employment relationship with the principal are not VAT-payers, if the said contracts define the conditions for providing the services and remuneration, and if the responsibility for the provision thereof is borne by the principal. This change relates i.a. to artists and authors within the meaning of the regulations on copyright and neighbouring rights, who provide services in return for remuneration paid in the form of royalties.
Bad debts relief
The amendment to the VAT Act introduces a bad debts relief which was not known previously by the Polish VAT Act. The bad debt relief means that the taxpayer is able to correct output tax on the supply of goods or services within the territory of Poland made to a contractor from whom he has not received the remuneration. The condition for the correction is that the receivables due to the taxpayer should be deemed uncollectible within the meaning of the income tax regulations. The debtor, in turn, is obliged to make a correction of his VAT deduction by correcting the declaration filed for the period in which he made the deduction in respect of the purchase of the cars.
Correction of VAT in export
According to the new regulations, taxpayers who received documents confirming the exportation of goods outside the territory of the Community with a delay (and therefore were not entitled to the 0% VAT rate) can correct VAT in the settlement for the month in which they received the said documents. This is the step back to the better regulations that were into force before 1 May 2004r.
Documents necessary for the application of the 0% VAT rate to an intra-Community supplies of goods
With refer to the new regulations taxpayers are not obliged to hold a confirmation of delivery of the goods to the purchaser, any more, in order to apply 0% VAT rate. Currently, taxpayers are obliged to hold the following documents: (i) transport documents received from a carrier responsible for exportation of goods from the territory of the country, from which it unequivocally follows that the goods were delivered to their destination in the territory of a Member State other than the territory of the country – if a transport of goods is entrusted to a carrier (forwarding agent), (ii) a copy of an invoice, (iii) specification of each piece of cargo.
Sanctions
As of 1 June 2005, the tax authority may not levy an additional tax liability, if the taxpayer recognises the VAT obligation too early, i.e. before the beginning of the settlement period in which the tax obligation actually arises. Another change regards taxpayers who, as to the rule, perform tax-exempt sales and are not obliged to maintain sales record. If these taxpayers start performing taxable sales and do not pay output VAT, the tax authorities will determine the amount of VAT using the 22% VAT rate only when the object of taxation cannot be determined.
