Additional 30% sanction for improper settlements of VAT
Act amending VAT Law, Polish Tax Code and Polish Fiscal Penal Code has been published. The amending act, among others, introduces additional 30% sanction for improper settlement of VAT, limitation of quarterly settlement of VAT and significant changes in relation to the refund of VAT surplus in 25 days.
Below we present the most important, in our view, aspects of the amending act. Most of these changes will come into force from January 1, 2017.
- All about current tax rates and changes in Poland, in our new brochure: Investing in Poland 2017
New sanctions in VAT
Poland: 30% vs. 20% penalty for improper settlement of VAT
Tax authorities determine the additional tax liability if a taxpayer:
- understated VAT liability or overstated the amount of VAT refund (also if this excess is transferred to the subsequent periods);
- did not submit a VAT return and did not pay VAT liability.
This sanction amounts to 30% of understatement of VAT liability or overstatement of the amount of VAT refund.The sanction will not be imposed if:
- the taxpayer files an appropriate correction of VAT return or files a declaration and pays VAT before the tax audit;
- improper settlement of VAT results from accounting errors or obvious mistakes or recognition of invoices in the wrong settlement periods, but still before the tax audit;
- this additional VAT liability applies to natural person who for the same act bear the penal fiscal responsibility.
In case the taxpayer corrects VAT settlements and pays the respective amounts after the tax audit or within control proceedings, then the penalty amounts to 20%.
Real estate perspective
This amendment affects asset deal transactions on the Polish market, as will increase the tax risk on re-classification of the transaction subject.
The above-mentioned additional tax liability will amount to 100% of understatement of VAT liability or overstatement of the amount of VAT refund if overstatement or understatement results in whole or in part from invoices documenting fraud.
Other important changes on VAT in Poland
VAT refund in 25 days – significant changes in conditions
The refund of VAT surplus in 25 days will be performed on the following conditions:
- input VAT declared in VAT return results from invoices which were paid in full via bank account of the taxpayer (if the value of an invoice exceeds 15,000 PLN). The confirmations of tax payment should be filed with the tax office;
- the amount of input VAT declared in subsequent periods and transferred to this period does not exceed 3,000 PLN;
- this taxpayer was registered as an active VAT payer and submitted VAT returns for at least 12 months before the period, in which it applies for VAT refund in 25 days.
Real estate perspective
Please note that in many cases these conditions will not be fulfilled. For example by applying set-off to settle the purchase invoice or by buying real estate to a newly established company. In practice, it should be assumed for bridge VAT financing that the refund period will be longer than 60 days (standard VAT refund period plus time required for tax audit).
Quarterly settlement of VAT only for small taxpayers
Elimination of the possibility of quarterly settlement of VAT for taxpayers other than small taxpayers. Moreover, also newly established entities will not have possibility to file VAT returns quarterly in the first twelve months of activity.
Reverse charge mechanism also for construction services
The amending act extends the reverse charge mechanism on various types of construction services (the list of these services is specified in Appendix no. 14 which will be added to the Polish VAT Act). For example, this mechanism will apply to construction of residential and non-residential buildings – works related to the construction of new buildings, rebuilding or refurbishment of existing buildings (.
Joint and several liability for VAT
In case when a proxy registers a given taxpayer for VAT purposes, he becomes jointly and severally liable for the taxpayer’s VAT arrears arisen within 6 months as of the registration date, up to the amount of PLN 500k.
In practice it will mean that proxies, advisors or accountants will be reluctant to register for VAT purposes any taxpayers on their behalf.
In case you are interested in further analysis on how the above mentioned VAT amendments affect your daily business, please do not hesitate to contact our local advisors.
More information can be found on the Polish website: TPA Poland