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Advicero Nexia | TAX NEWS | September 2020

  1. Invoice sufficient to deduct VAT even in a tax carousel – deadline for renewal until September 10, 2020
  2. Verification of subsidies given within programs of Polish Development Fund (PFR)
  3. PLN 500 sanction for mistake in JPK_VAT? The tax office ‘has the possibility’, no obligation
  4. Proper control over the resources necessary for VAT in Poland – ruling of WSA
  5. Insurance services without withholding tax? The courts are changing the current position of tax authorities
  6. Changes in the tax on capital gains
  7. Estonian CIT with multiple conditions and restrictions

1. Invoice sufficient to deduct VAT even in a tax carousel – deadline for renewal until September 10, 2020

Only until September 10, 2020, applications for the reopening of tax proceedings can be submitted on the basis of the judgment of the CJEU sign. C-430/19. This is relevant for cases where a carousel or VAT fraud has been identified.

The above judgment was published on August 10, 2020 and from that time the period for submitting an application for the resumption of administrative proceedings or a 3-month period for the resumption of court proceedings must be counted. The judgment itself is valuable because it states that the invoice itself may be the confirmation of the transaction, and the tax authorities must provide evidence that directly contradicts the content of the invoice, and not require the taxpayer to prove the transaction (or due diligence or good faith).

Such theses of the Court of Justice offer a good chance of revoking an “empty” decision issued in a carousel procedure. Most often, the Polish authorities, unfortunately with the support of a large part of administrative courts, question the right to deduct VAT on the basis of indirect circumstances, circumstantial evidence not related to a taxpayer unknowingly involved in tax fraud and requesting additional evidence of due diligence. The theses of the judgement of the CJEU allow such decisions to be refuted.

Cases in which a final judgment of an administrative court has already been issued may be resumed in court until November 10, 2020.

2. Verification of subsidies given within programs of  Polish Development Fund (PFR)

As indicated by the Vice President of the Polish Development Fund, a mechanism is being developed to detect irregularities in granting the subsidies to companies. The term for preliminary controls is estimated at the period of September when the help applied for has already been granted to entrepreneurs.

Until now, the focus has been on examining applications as well as providing funding. It is worth noting that the companies were verified on a cursory basis at the time of the submission of the applications. As indicated, together with the National Treasury Administration, algorithms are being prepared to help detect irregularities in a closed entrepreneurs’ database. In case of doubt, the company is to be called for possible explanations. However, if the system indicates settlements other than those available in the databases, the company will be called to return the subsidy.

3. PLN 500 sanction for mistake in JPK_VAT? The tax office ‘has the possibility’, no obligation

From October 1, 2020, the combination of SAF-T (JPK) documents with VAT returns takes place. However, there is a problem when combining these two issues – the possibility of making a mistake increases, because the scope of data provided in the new combined document is not the sum of the data currently provided in SAF-T and VAT-7, but is much wider. From that date, a fine of PLN 500 will also apply for each mistake made.

If the entrepreneur provides a defective JPK file, the tax administration will have the right to impose a fine. This is a basic change from the original wording of those provisions, which provided for the automatic imposition of a mandate. As the tax authorities point out, these mistakes will be sanctioned in cases that ‘make it impossible to verify the correctness of transactions’, which however does not stem from the rules. However, before the taxpayer is sanctioned, the Head of the Tax Office is to notify in advance the mistakes made and the entrepreneur will have the opportunity to make a correction within 14 days or to provide explanations regarding mistakes in the records. Thus, it is only in the absence of a correction or failure to provide adequate explanations that the tax authorities will impose fines accordingly. It is therefore, necessary, to prepare for the upcoming changes and to consistently verify all submitted documentation.

4. Proper control over the resources necessary for VAT in Poland – ruling of WSA

The company does not have control over the contractor’s resources, so it will not be subject to VAT in Poland – stated Provincial Administrative Court in the ruling of July 28, 2020, I Sa/GL 141/20.

In the subject case, the Swiss company used the logistics and warehouse services of a Polish company which stored the goods, prepared orders for shipment, managed returns, received complaints, and took care of shipping and transport services. The dispute concerned the place where the logistics and warehouse service was taxed and the permanent place of business of the Swiss company was actually determined. Accordingly, the Director of National Tax Information, issued a tax ruling that this service should be taxed in the fixed place of business, ie in Poland. He argued that there was no obligation to have personnel and technical facilities, but only adequate control over the contractor’s facilities.

However, that was questioned by the Provincial Administrative Court in Gliwice, which stated that the controls carried out by the Swiss company were insufficient to establish that the warehouse was made available to it. Thus, the Swiss company does not complete the proper control of the contractor resources and consequently is not subject to VAT in Polish territory.

This sentence is good news for many foreign entities operating a limited business in Poland – as it excludes VAT taxation, one of the highest in the EU.

5. Insurance services without withholding tax? The courts are changing the current position of tax authorities

Insurance services are not services similar to guarantee agreements and accordingly should not to be subject to withholding tax – as stated by the Provincial Administrative Court in Bydgoszcz in a ruling dated January 22, 2020.

The position of tax authorities on insurance services was problematic and doubtful so far, mainly due to absence of actual points in the CIT law, which would indicate that WHT should be applied on those services. However, the upholding case-law states that insurance acquired from a non-resident does not constitute services of a similar character to guarantees and should therefore not be subject to withholding tax.

In support of its position, the Provincial Administrative Court states that, despite the similarities, those services are differently qualified. A different feature is, first of all, the fact that there is no obligation to pay insurance contribution with guarantees. Foregoing viewpoint of the tax authorities have treated insurance services as services similar to guarantee services, on the ground of similarity in the classification of the type of insurance guarantee or the activity of giving guarantee.

6. Changes in the tax on capital gains

As the Deputy Minister of Finance, Jan Sarnowski, points out, the implementation of relief and exemptions in relation to the taxation of capital income is being analyzed. The aim is to encourage long-term investment.

The introduction of changes is the so called Belka’s tax seems to be important due to the low interest rates on bank deposits. This is particularly disadvantageous for small savings, where tax is paid on the total amount of interest.

It is worth mentioning that the Belka’s tax constitutes a large percentage of budget revenue (around PLN 3 billion per year), which is why its elimination would contribute to significant financial losses for the state. As Deputy Minister Sarnowski pointed out, the elimination of the capital cash tax in Poland would not only result in a loss of revenue to the state budget, but also, due to tax preferences, could result in an inflow of speculative capital into Poland and cause an increase in the market for speculative financial instruments. The above could cause significant changes in the Polish financial market and as a result the Polish economy would have additional losses.

7. Estonian CIT with multiple conditions and restrictions

The conditions set for the Estonian CIT come down to reducing the number of taxpayers who could benefit from shifting taxation to the moment of profit consumption. Initially, 200,000 enterprises were to take advantage of the preferences, but as it turned out, only about 34,000 companies will take advantage of this opportunity.

The hiring condition is problematic for small businesses. It is worth noting that this formulation seems abstract to small entrepreneurs. Small companies are not adequately developed to be able to hire more employees, due to the still undeveloped financial situation. What’s more, another condition that companies should meet is the limit of PLN maximum income 50 million per year and the limitation in relation to the shares and stocks held, where only a natural person can be a shareholder.

The above conditions exclude many companies from the possibility of using the preferences, in particular startups that base their funds on this type of financing. Estonian CIT was supposed to be a suitable solution for companies, but as it turns out, few can take advantage of such reliefs.

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