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Advicero Nexia | TAX NEWS | May 2021

  1. General partnerships do not have to be taxed with the CIT
  2. E-sales revenue should not be included in the calculation of the retail sales value limit
  3. Internet parcels with VAT
  4. Tax strategy – a tax year different than a calendar year
  5. Automation of enforcement titles from 1 July – a threat for taxpayers
  6. A 20% VAT sanction cannot be imposed automatically – CJEU ruling Grupa Warzywna
  7. New template request for tax ruling – practical consequence

1. General partnerships do not have to be taxed with the CIT

From January 1st, 2021, limited partnerships and some general partnerships are CIT taxpayers (when the partners of the general partnerships are not only natural persons). However, the tax rules provide for an exception to this taxation if the general partnership submits information about PIT and CIT taxpayers in due time (on the CIT-15J form).

Article 3 sec. 1a the CIT Act indicates the following deadline for submitting this information:

  • before the start of the financial year or,
  • within 14 days from the date of changes in the composition of taxpayers, which make necessary to submit an update of this information.

Doubts arise when the general partnership is formed as a result of a transformation of another legal form. The moment of registration of the company in the register means the beginning of the financial year, so the general partnership cannot file the information before that date, because it does not exist yet. When is the right moment to file the given information? Or is it a situation when a general partnership automatically becomes a CIT taxpayer?

A limited partnership, which plans to transform into a general partnership, has applied for a ruling. With the transformation, neither the composition nor the proportions of the company’s shareholders will change. According to the applicant, the information about PIT and CIT taxpayers should be submitted by the transformed company (the limited partnership) and not the new transformed company (the general partnership). The tax authority confirmed this position pointing to the fact that the company transformed (limited partnership) is a legal predecessor of a general partnership, so if the company transformed met the deadline provided for in the CIT Act and submitted the required information, a partnership created as a result of the transformation of a limited partnership will retain the status of tax transparent entity.

Individual ruling of the Director of the National Tax Information of March 15, 2021, No. 0111-KDIB1-1.4010.9.2021.2.ŚS.

We also encourage you to read the answer to the interpellation regarding general partnerships:

2. E-sales revenue should not be included in the calculation of the retail sales value limit

The tax ruling concerned the assessment of retail sales tax for various business models: in brick-and-mortar stores, in brick-and-mortar stores in shopping malls, and online sales.

In connection with the above facts, the question arose whether the revenue obtained through electronic sales by means of an e-shop and auctions constitutes revenue within the meaning of Article 5 of the Act on retail sales tax (hereinafter: PSD) in connection with Article 8 of the same Act and the tax obligation arises when the threshold of PLN 17 million is exceeded. The applicant took the position that revenue generated from online activities should not be included in the calculation of the retail sales value limit realized in a given month.

The argumentation of such a thesis was mainly based on the analysis of the short, yet concise PSD Act. In Article 3(5) we find a definition of retail sales, i.e. sales taking place on or off business premises – both concepts within the meaning of the Consumer Rights Act. Sales agreements concluded through such sales channels as e-shop and auctions will not meet the conditions for agreements concluded on or off business premises. The explanatory memorandum to the draft law (Parliamentary print 615 from 2016) also indicates that this thesis is correct. Additionally, the individual interpretation of 20 September 2019, ref. 0111-KDIB3-3.4019.1.2019.1.PK, was cited. This position was also confirmed by the director of the National Tax Information: individual interpretation dated 9 February 2021, 0111-KDIB3-3.4019.3.2020.1.PK

3. Internet parcels with VAT

It is worth reminding that recently a draft amendment to the VAT Act (hereinafter: Amendment) has been published which introduces changes in e-commerce taxation. The purpose of the changes is primarily to tighten up the tax system. The changes apply in particular to online shopping, including such platforms as eBay or Amazon. The Amendment is to be effective as from 1 July 2021, so what major changes should online platforms prepare for?

First of all, it should be mentioned that the VAT exemption for importing products of smaller values – up to EUR 22 – has been abolished. This change will mean that the entity will have to pay VAT on shipments from third countries, which will certainly increase the final price. Importantly, for consignments up to a value of EUR 150, the operator of the online platform through which the consumer makes the online purchase will have to pay VAT.

However, a solution to this problem has been envisaged – the so-called Import One Stop Shop (IOSS), i.e. one-stop shops, thanks to which it will be possible to collect VAT at the moment of selling products and thus automatically pay it at that point. This solution is expected to facilitate the functionality of online platforms, as it will remove not only the obligation to collect import tax at a later stage, but also the need to carry out customs clearance.

4. Tax strategy – a tax year different than a calendar year

It is worth recalling that as of January 1st, 2021, there is an obligation to prepare and publicly disclose information on the implemented strategy for the tax year. This provision applies to tax capital groups and other non-capital group taxpayers whose revenue for a given tax year exceeded €50 million (approximately more than PLN 200 million).

Until December 31st, 2021, the head of the tax office responsible for a given taxpayer must be provided (electronically) with information on the address of the website where information on the implementation of the tax strategy (prepared or translated into Polish) was posted – the deadline provided for in the act stipulates that a taxpayer must post such information by the end of the 12th month following the end of the tax year (Art. 27c sec. 4 of the CIT Act). Due to suchdeadline specified in this way, doubts have arisen with regard to entities whose tax year is not the same as a calendar year. As the Ministry of Finance pointed out: “in the case of taxpayers with a shifted tax year, the provisions on the obligation to prepare and publish tax strategy information entered into force during the ongoing tax year. Consequently, in the case of a taxpayer with a tax year that began on April 1st, 2020 and ended on March 31st, 2021, the first publication obligation will occur 12 months after the end of the tax year in which the new regulations came into force. In other words, such a taxpayer will have to publish the tax strategy information by March 31st, 2022.” Therefore, entities with a postponed tax year have more time to complete the formalities in connection with the new regulations.

It is also worth noting that failure to comply with this obligation will result in a fine of up to PLN 250,000 (Article 27c sec. 8 of the CIT Act). However, no penalties have been foreseen in case of any mistakes.

5. Automation of enforcement titles from 1 July – a threat for taxpayers

The Ministry of Finance has announced that from 1 July 2021, it will be possible to transmit electronic enforcement application to the tax office.

The automation of this process is to take place via information and communication technology system, which will not only speed up the enforcement process, but above all, eliminate for existing problem of unnecessary paper formalities. Such measures are aimed at accelerating correspondence processes between creditors and the National Tax Administration, which will translate into a shorter start of the enforcement process.

The introduced changes are dedicated by Article 26aa (1) of the Enforcement Proceedings Act, which indicates that the ICT system with the use of which enforcement requests and enforcement titles or information provided by the creditor together with the application and the writ of execution to the enforcement authority being the head of the tax office, is operated by the Head of National Fiscal Administration.

However, this is no good news for taxpayers. It is worth remembering that the provisions on enforcement in administration are used to instrumentally prevent the statuteof limitations on taxes and hence are often used even before a decision (security) is issued. The new procedure may mean that taxpayers will have significantly fewer chances to defend themselves against such actions.

However, the timing of the announcement of these changes was dependent on the announcement in the Minister’s Official Journal or in Public Information Office (BIP) under Article 28 (3) of the Act amending the Act on enforcement proceedings in administration and other acts. Thus, as announced on the website of the Ministry of Finance on 4 May 2021, from 1 July 2021 enforcement request and enforcement titles will be transmitted to the tax office electronically.

6. A 20% VAT sanction cannot be imposed automatically – CJEU ruling Grupa Warzywna

Polish regulations contained in the VAT Act are incompatible with EU law. Such a statement was heard once again this year from the judges of the CJEU in Luxembourg, this time in the judgment of 15 April 2021 in case C-935/19 Grupa Warzywna.

A Polish company purchased a property that had been occupied for two years at the time of purchase. It was agreed that the seller would invoice with VAT, which the Grupa Warzywna reported in its return, and then simply claim back the VAT resulting from the excess. However, it turned out that the authority’s logical view was that the transaction was exempt from VAT and that the companies had not made a declaration that they were willing to tax voluntarily and were not entitled to a refund. The Grupa Warzywna therefore submitted the relevant corrections, and yet the authority by way of a decision under Article 112b(2) imposed a 20% sanction on the undue VAT, after which the case went to court in Wrocław. The case appeared to be so complex that the WSA in Wrocław asked a preliminary question to the CJEU.

The CJEU judgment in this Polish case shows that the principle of proportionality has been disturbed. A clear distinction must be made between situations in which an offence is premeditated and situations in which there is no indication of an intention to deplete the State Treasury, as was undoubtedly evident in this case. The question is, however, what key to follow when analyzing the above: making an unconscious mistake versus making it intentionally.

Consequently, the authority should not impose an additional sanction of 20% on a taxpayer who followed its advice and corrected his declaration. The judgment seems to be a gateway to recovering the unduly paid sanction, however, it should be remembered that the factual situation is quite peculiar as the Polish State Treasury de facto did not suffer any damage. 

By the way, it is worth mentioning that the Ministry of Finance in the SLIM VAT 2 package is already working on an amendment which, in a way, was applicable in this case. It is a solution to the issue of the declaration of will to apply VAT to the supply of structures, which will be able to be included in the notarial deed and will constitute a sufficient premise for the resignation from the exemption without the need to submit a separate notice. This solution is correct, all notarial deeds of disposal of real estate go to the tax authorities anyway (because of other taxes), so there is no need to multiply formalities.

7. New template request for tax ruling – practical consequence

From 1 January 2021, new templates for applications for tax ruling are in force. The new liabilities oblige applicants to provide cross-border elements of a factual state or future event.

From 2021, the applicant is obliged to provide information about natural person, legal persons or organizational units without legal personality, including the full name, foreign identification number, type of identification, country the issue of this number and country or territory of the registered office of the legal person or organizational unit without legal personality. Furthermore, section H.3 is dedicated to record the details of the foreign establishment.

Such a change is likely to correspond to the provision which indicates that in the case of factual state or future event, the transaction actually covers all transaction and the rest of events indicated in Article 14b (3a) point 2 of the Tax Ordinance, including precisely cross-border effects. However, in practice, this change may cause big problems, especially as regards turnover taxes. In their case, there may be many more contractors than e.g. in the case of CIT and the ORD-IN template contains only two fields to be indicated. On the other hand, annex ORD-IN/A, does not contain part H at all, although it is to this annex that the footnote to part H refers in the event, of the need to list a larger number of entities.

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