- CJEU ruling on Polish intracommunity settlements
- Tax authorities are more willing to impose fines for minor offences
- New MF explanations of the use of the sugar fee and explanations of small alcohol beverage
- Mistake during paying to an account outside the whitelist of VAT-taxpayers
- Order confirmation cannot be considered as a simplified invoice
- Income tax settlement is approaching
1. CJEU ruling on Polish intracommunity settlements
On 18 March 2021, a breakthrough judgment on VAT neutrality took place. The Court of Justice of the European Union in case C-895/19 ruled that Polish regulations on VAT settlements for Intra-Community Acquisition of Goods do not comply with Directive 112. Settlement of output and input VAT should take place in the same period even after the statutory 3-month deadline has been exceeded. This is the answer to the preliminary question submitted at the end of 2019 by the Administrative Court in Gliwice.
What has it been like so far?
A Polish taxpayer would declare output tax by means of an adjustment at the time the tax liability arose in a past period. Only in the current period was the taxpayer obliged to take into account input tax. Due to the fact that the tax due to the tax office was recognized first, this often resulted in interest on arrears, which in the court’s opinion was unacceptable.
Doubts have arisen since 2017, i.e. since the introduction of an additional condition, i.e. the reporting of input and output VAT in two different periods. The CJEU agreed that national law may introduce additional guidance provided that it does not interfere with the neutrality principle.
It is therefore worth verifying past settlements, since in the event that the taxpayer has paid such interest, such a judgment will entitle him to recover it. Importantly, the resumption of proceedings in many cases will be limited to 30 days from the date of publication of the judgment, about which we will inform you immediately.
The judgment should be regarded as very positive information for many taxpayers and it will be possible to apply it relatively broadly also to transactions involving import of services and purchase from a non-resident. Undoubtedly, VAT neutrality is its most important feature and it is worth ensuring that it is always maintained. In practice it has very often happened that an invoice has not been delivered on time for various reasons. The legislator is already working on the issue in the recently announced SLIM VAT 2 package.
Link to judgment: ->here<-
2. Tax authorities are more willing to impose fines for minor offences
From 2021, exceptionally severe provisions relating to penalties for fiscal offences may come into force. The governmental draft amendment of the Act on Excise Tax and other acts, apart from a number of changes in excise tax, changes the wording of art. 48 par. 2 of the Fiscal Penal Code.
The provisions previously in force provided for the possibility of imposing a fine not exceeding the double amount of the minimum remuneration by way of a fine. It is worth pointing out that such a fine may be imposed even for minor offences, such as failure to file a declaration on time or improper issuance of a proof of sale. The amended legislation provides for an increase of the maximum amount to which a fine may be imposed to five times the minimum wage, which means that the amount will reach as much as PLN 14 thousand. Of course, the taxpayer always has the possibility to refuse to accept the fine, which involves referring the case to court proceedings. According to the Ministry of Finance, the changes are to enable controllers to impose sanctions appropriate to the committed act, as well as to relieve the judiciary.
However, these changes aimed at tax fraudsters may be particularly painful for small entrepreneurs, who already have considerable problems with finding their way in the maze of tax regulations and are thus much more vulnerable to unintentional infractions. Faced with the prospect of having to pay exceptionally harsh fines and the possibility of years-long court proceedings, it is hard to say whether the proposed changes will not exacerbate the already overburdened justice system.
3. New MF explanations of the use of the sugar fee and explanations of small alcohol beverage
With the appears of the new legislation, there have been numerous doubts among taxpayers about the application of the sugar fee or the correct application of the provisions on small alcohol beverage.
Until now, there was no doubt where taxpayers could submit their questions to the tax authority, whether through the Binding Rate Information (WIS), Binding Excise Information (WIA) or when applying for tax ruling. There were doubts however about the mode of issuing individual interpretations against newly established regulations for the sugar fee and small alcohol beverage. However, a law was adopted on 25 February 2021 to minimize the above problems for taxpayers.
It regulates i.e. the questions of applying for clarifications on the sugar fee and regulation of small alcohol beverage. It has been indicated that the taxpayer will have the opportunity to apply to the Director of National Tax Information for a tax ruling and for a general interpretation to the Minister of Finance in the above matters. An additional convenience is the possibility to apply for a position to Minister of Health. Such a new feature is primarily due to the belief that fees have been introduced to promote a health-promoting consumer choice.
It might seem that such a possibility is an additional advantage for the taxpayer, but it is worth noting here that when applying for clarifications in the area of sugar fee and small alcohol beverage, the taxpayer will have to reckon with an extended period of time to obtain such an interpretation. This is justified by the fact that Minister of Health will have an additional 21 days to comment on the case.
Furthermore, the small and medium-sized enterprises, who requested clarifications on the application of the sugar fee on 2 February 2021, received an answer from the Minister of Health to the question, which clarified i.e. the issue of being subject to the fee on powdered beverages and concentrates (e.g. soup in powder form). As the Minister of Health has pointed out in the explanatory notes, such products are not subject to a fee because of the definition of syrup, which means a flavoured food intended to be diluted with water or used as an additive in beverages or desserts, under which such products in the form of powders are not subject.
Despite the explanations issued on the sugar fee, it can be expected that not all problematic issues of taxpayers are covered here. As entities will have the opportunity to request tax ruling from the authorities, we can expect a numerous questions from taxpayers. Behind this conviction is not only the fact that the tax ruling are vague, but above all the lack of broader and clear explanations for the new legislation. Therefore, despite the above objections, it is worth trying to tax ruling as an element protection.
4. Mistake during paying to an account outside the whitelist of VAT-taxpayers
In accordance with the individual interpretation issued by the Director of the National Tax Information of 22.12.2020, reference number: 0111-KDIB2-1.4010.400.2020.1.PB., the authority confirmed the correctness of the applicant’s position. Therefore, the correct approach to corporate income tax is to establish that in a situation where:
- the Company has made payments for invoices confirming the delivery of goods or the provision of services, made by a supplier of goods or a service provider registered for VAT purposes as a VAT taxpayer active,
- by transfer to bank accounts that weren’t included in the “white list”,
- and didn’t submit, with the first payment of receivables to these accounts, a notification of payment of the amount due to this account to the head of the tax office competent for the taxpayer who made the payment, within 7 days from the date of the transfer order,
- and then received a refund of the amounts paid to the bank account,
- and will make another payment by bank transfer to the bank account on the “white list”,
in such a case, the costs incurred for the purchase of goods and services, confirmed by invoices, are not to be deducted for CIT purposes.
The applicant was a limited liability company which is a CIT taxpayer. The company made a payment against which the provisions of the Law of Entrepreneurs impose the obligation to settle via a payment account to an account other than the one indicated in the “white list” of VAT payers and didn’t submit the above-mentioned notification. Therefore, the payments were made on the bank accounts of Polish contractors kept by banks that don’t operate through a branch in Poland.
In the opinion of the applicant, the costs for the purchase of goods and services confirmed by invoices, which the Company will re-pay by bank transfer to the bank account included in the list of entities referred to in Art. 96b of the VAT Act, are tax deductible costs and the limitation specified in Art. 15d par. 1 of the CIT Act shall apply any more.
Pursuant to art. 15d par. 1 point 2 of the CIT Act, taxpayers don’t include the costs in the part in which the payment for the transaction referred to in Art. 19 of the Entrepreneurs’ ACt was made by bank transfer to an account other than that included on the date of the transfer order in the list of entities from the “white list” – in the case of delivery of goods or services, confirmed by an invoice, made by a supplier of goods or a service provider registered for the purposes of tax on goods and services as an active VAT taxpayer.
However, after re-payment by bank transfer to the account on the list, the Company will be able to include the above-mentioned costs for the purchase of goods and services as tax deductible costs.
5. Order confirmation cannot be considered as a simplified invoice
An application for individual interpretation presents a future event: the applicant intends to place an order for printer paper. The subject of the order will be only printer paper, for which a single VAT rate of 23% is applicable. The amount of the order will not exceed PLN 400. The order is to be executed within 15 days from the date of its placement. The entrepreneur is an active VAT taxpayer.
According to the future state of affairs, the question arose whether the entrepreneur would be entitled to deduct VAT on such a simplified invoice. The applicant argued that it would be allowed to deduct the VAT, arguing mainly that the only difference is that it has an order acceptance confirmation number instead of a fiscal receipt number. The system generates such an order acceptance confirmation number which, he claimed, is equivalent to and analogous to the fiscal receipt number.
He referred to the Tax Clarification dated 16 October 2020 on the recognition of fiscal receipts as simplified invoices: “In the case of fiscal receipts, it is the fiscal receipt number that uniquely identifies the receipt with the TIN up to PLN 450 as a simplified invoice”.
However, this opinion was not shared by the Director of the National Tax Information.. According to new regulations effective from 1 January 2020, in the case of sales recorded with cash registers, an invoice is issued only if the receipt includes the tax identification number. In conclusion, confirmation of order acceptance is a document of strictly informative nature only. It is neither a simplified invoice, nor an invoice in the classic sense. In consequence, such order confirmation will not entitle to reduce the amount of output VAT by the input VAT from such confirmation.
In the present case, for accounting purposes and as proof of the transaction carried out, a receipt with a VAT number or an invoice will be issued. This explanation seems to make it clear that an invoice is a formalised document that has its own specific characteristics and at the same time provides certain rights.
Individual interpretation by the director of the National Tax Information of 9 February 2021, ref. 0111-KDIB3-1.4012.825.2020.2.KO
6. Income tax settlement is approaching
The deadline for submitting a CIT return for 2020 is approaching inexorably, therefore we would like to remind you of a few important issues:
Carry-back settlement of tax loss
There is a possibility of carry-back for the tax loss incurred in 2020 – entrepreneurs can settle the loss on business activity incurred in 2020 by submitting a correction of the tax return for 2019. It is possible if the following conditions are met:
• the loss was incurred in 2020 – although the regulations have been in force for some time, only now it is possible to actually determine the amount of the loss in 2020,
• in 2020, there was a decrease in revenues by at least 50% compared to 2019,
• the loss suffered is a consequence of COVID-19.
The limit that has been established for the one-time reduction of income is PLN 5,000,000. More on this topic can be found here:
Exemption from obligatory correction due to bad debts
Upon fulfillment of the above mentioned conditions regarding the COVID-related 50% revenue decrease, taxpayers are not obliged to make a correction related to costs of unpaid liabilities.
Restructuring activities and loss settlement
From 1st January 2021, a provision was introduced (Article 7 paragraph 3 point 7 of the CIT Act) that prevents the settlement of losses in case a taxpayer acquired another entity or acquired a business or an organized part of a business, or received a cash contribution for which it acquired a business or an organised part of a business and as a result of those transactions
- the taxpayer’s business, in whole or in part, is different from the principal business conducted before such acquisition or takeover, or
- at least 25% of the shares of the taxpayer are held by an entity or entities that did not have such rights at the end of the tax year in which the loss was incurred
The new regulations may be a significant problem for entrepreneurs due to the lack of transitional provisions, so these provisions should be applied already until the settlement of 2020.
Information about the extension of the deadline for CIT settlement
On 29th March, 2021, was signed the regulation extending the deadline for submitting the annual CIT from 31st March 2021 to 30th June 2021.