The main assumption of the amended Act was to eliminate multiple doubts of taxpayer were relevant to the different VAT rates of similar products. The Act amending the foregoing rules on the using VAT rates was intended to be simple, transparent and more friendly for taxpayer. Whether actually attempt to eliminate controversial tax rates actually succeeded? How it shows, introduced only from 1 July 2020, template rate introduces other difficulties in the correctly classification of goods. There are already ‘further’ difficulties, as they appear literally, day by day these rules are applied. Successively issued Binding Rates Information also provides interesting material here.
What changes to the new tax matrix?
It is worth mentioning the main changes that took place on 1 July 2020. This revolution involved decreasing VAT rates on tropical and citrus fruits, some edible nuts, citrus peels, melons, baby and children’s products and hygiene products – all reduced from 8% to 5%. Moreover, changes have also been observed in breads regardless of type or cookies – here there have been slightly changes due to the reduction of products from 8% rates and 23% to 5%. The changes also covered mustard, sweet pepper spices and some processed spices – here the rate reduced from 23% to 8%. As it turns out, a significant change is the exclusion of the possibility of using the 5% rate to products such as lobsters, octopus or products involve CN code 0306 – CN 0308 (i.e. rock lobster, sea crayfish, crabs, shrimps, oysters, scallops, mussels, squids, snails – other than seas, sea urchin or jellyfish).
A cookie to takeaway, or maybe not?
The new rules introduce both reduced and increased VAT rates for determine products. Bakery and biscuits products were a significant change, where the dependence of the term of consumption was eliminated, which has previously contributed to multiple disputes. As a general rule, the Act introduces the same 5% rate for biscuits products with different expiration date. It should be mentioned that, until now the rate of 5% did not apply i.e. gingerbread, sweet biscuits or waffles.
However, in order for taxpayer not to be feel too confident, it should be noted, that however, the place where the consumption of cookie products in consumed is questionable, which, depending on whether they are consumed indoors ordered by the customer ‘takeaway’, will be apply to a completely different rate of VAT. It is controversial that, as a general rule, these products should be involve to a 5% rate, but as it turns out, this exception applies only to takeaway products. However, as explained, cookies served directly to the customer’s table must be involve to an 8% rate.
From the point of view of tax law, such an activity is classified as an of supply of goods and services on the basis of ‘catering services’. In the explanations to the amended Act, you can find explanations of the Ministry of Finance about the conflict. As indicated, the supply of goods and services in accordance with the provisions of the goods and services tax, should be classified in department 56 of the PKD (i.e Polish Classification of Products and Services PKWiU 2015), so according to the regulations – it is necessary here to apply an 8% VAT rate. Ordering cookie products and then served to the table will be treated as a catering service and consequently, the 5% rate will not apply.
VAT rates in agriculture with an increase?
Difficulties also concern the agricultural sector and doubts as to the classification of the appropriate rate for agricultural products or capital goods, which, however, has been highly controversial for farmers and consumers who fear about price increases. Following the announcement of the amendments to the Vat Act, multiple questions by taxpayers about a possible increase in the tax rates of the products in agriculture. However, as the Minister of Agriculture and Rural Development explained, Jan Krzysztof Ardanowski: (…) the reduced rates of 5% and 8% for agricultural products and capital goods what is necessary on the holding do not disappear. They remain. They were only transferred from the Regulation of the Minister of Finance to the VAT Act, which means strengthening their protection.
The problem concerned a change in the VAT classification rules, which are intended to simplify the system of tax rates and to increase the security of taxpayers in an appropriate interpretation. It should be pointed that, despite changes in the classification rules, the tax rate for certain products does not change, but in order to determine this, taxpayers sometimes have to make an in-depth analysis of the new rate matrix. The problems refer to Appendix No 3 of the VAT Act, where we have lists the goods and services covered by the 8% rate. The list presented in the Appendix indicates the i.e. seeds and oily fruits, seeds and various fruits, industrial and medical plants, straw and feed (exclusion to intended for human consumption).
Problems in applying the rate? Get help from BTI
The difficulties relevant with the correct determination of tax rates have been a common problem for taxpayers. After the amendment of the Law, this conflict has still not been completely eliminated. In a later stage, entrepreneurs are obligated to constantly monitor the explanations that are issued by the tax administration on tax rates in order to apply them accordingly. Future wrong determine of tax rates on goods and services (e.g. cookie products) may result in subsequent legal sanctions. Accordingly, the tax authorities should take more care to correctly identify the goods and services to the new rates, which would not in fact create additional doubts for the taxpayer.
In view of the multiple problems of the proper classification of tax rates, it is worth to take for the possibility of using the Binding Tax Information (BTI). BTI is nothing more than an administrative decision that sets the rate of tax on a taxpayer’s to determine good or service – but only where those provisions refer to statistical classifications. There is therefore serious doubt to whether, when the reduced rate relates to the products described in the Appendix “no matter of the symbol of the CN”, BTI or a binding tax ruling must be requested. On the other hand, when we have other ‘non-rate’, VAT rules which however refer to statistical classifications (e.g. obligatory split payment), it will be appropriate to request the BTI.
In case of use this possible, you must submit a request to the National Tax Information, where you will be able to obtain an adequate answer about the appropriate tax rate or the applying of another provision. When the information is release, the taxpayer will not be take to penal liability and consequently, information issued through the BTI cannot be challenged by the tax authority in next stages. Furthermore, interest will not be charged in the case of a possible tax arrears related to at apply wrong rate.