Puls Biznesu

On 11 April 2017, SAC entered a break-through judgment (case no. I FSK 1104/15) changing its previous position on how to interpret continuous services. The court held that continuous services include also recurrent services, even if they are provided in an intermittent manner, i.e. at intervals. This new decision may turn out to be favourable for businesses as it moves the point in time when the tax becomes chargeable (tax point). The authors describe the related case law and explain how this change may affect businesses in practical terms.

International Tax Review

Foreign businesses transporting goods into or through Poland face heavy financial penalties if they fail to comply with the Monitoring Act. Lidia Adamek-Baczyńska, and Olga Palczewska of Doradztwo Podatkowe WTS&Saja explain the key points of the new law.

April 2017 saw the entry into force of a new Polish law on a monitoring system for the carriage of goods by road (the Monitoring Act). The Monitoring Act applies primarily to excise goods for which there are plenty of excise and VAT compliance issues that reduce the government’s revenues. The new law imposes new duties on businesses carrying certain types of goods, called "sensitive goods", such as tobacco, alcohol and certain chemicals.

The monitoring requirements under the Monitoring Act apply not only to Polish but also to foreign carriers of sensitive goods in transit through Poland. These entities are required to file any such carriage with a special electronic register, called “SENT”, which is kept by the Head of the National Revenue Authority. Any SENT filing, whether registration, update or amendment, may only be made via an account set up on the PUESC platform, which is the Polish official platform for electronic customs and revenue services. 

International transit – new duties

The new law may affect a broad range of foreign businesses as Poland is the transit route for many vehicles carrying goods between destinations in western or southern Europe and eastern European countries: Estonia, Belarus, Latvia, Lithuania, Russia and Ukraine.

In the case of carriage through Poland of sensitive goods from one member state to another member state or a third country, the carrier must make a registration filing with SENT before the start of the Polish leg of the journey (having first registered itself with PUESC). The registration filing should provide various details, including the particulars (names, addresses) of the carrier, sender and recipient, the date and place where the journey starts and ends in Poland, the particulars of the goods (CN code, quantity, weight or volume) and the consignment note number. It is not until such filing is made and the carrier receives a reference number (filing identifier) that the carrier is allowed to transport the sensitive goods concerned through Poland without the risk of severe financial penalties.

Sensitive goods – what is subject to the monitoring requirement?

The Monitoring Act lays down a list of goods that must be monitored when carried. The list includes mainly three groups of excise goods: fuels with the CN codes and Polish PKWiU classification codes mentioned in the Monitoring Act, ethyl alcohol and dried tobacco. While in the case of the first two groups, the monitoring requirement applies only to consignments with a gross weight or volume of more than 500 kilograms or 500 litres, respectively, there is no quantity threshold for dried tobacco so that the requirement applies to this produce regardless of its quantity in the consignment. However, the Monitoring Act provides for exceptions (few of them, for that matter) whereby the monitoring requirement does not apply, e.g. depending on the size of the container.

Carrier – broad definition

The statutory definition of carrier is very broad. It is not limited merely to those entities that are licensed to engage in the business of carriage by road, but extends to all individuals, legal entities and unincorporated organisations that are in business and engaged in the carriage of goods. Accordingly, the Monitoring Act applies also to all international carriers and to foreign business entities carrying sensitive goods incidentally in relation to their principal business.

Penalties for failure to file

A failure to file or a filing that is not compliant as regards to the registration of type, quantity, weight or volume of the goods attracts a penalty of PLN 20,000 ($5,500).

Under the Monitoring Act, the penalty will not be imposed where the variation is not greater than 10% and where so justified by important interests of the carrier. In addition, financial penalty applies also to the driver if he does not have a reference number for the carried goods.

This article was prepared for International Tax Review by Lidia Adamek-Baczyńska, tax adviser and partner, and Olga Palczewska, consultant, at Doradztwo Podatkowe WTS&Saja.
Doradztwo Podatkowe WTS&Saja is the exclusive member firm of WTS Global in Poland.

Rzeczpospolita

The parent entities of Polish groups with consolidated prior year's revenues exceeding EUR 750 million and certain companies of foreign groups will make their first CbCR filings by 31 December 2017. In addition, each Polish member of such a reporting group must file a statement identifying the reporting entity and its tax jurisdiction. Failure to submit a CbCR report or statement is punishable by a fine of up to PLN 1 million. The tax administrations of the countries involved will mutually exchange these reports to identify potential profit shifting. The article also discusses the minimum content of a CbCR filing.

Rzeczpospolita

According to a recent SAC judgment of 9 March 2017 (case no. FSK 1854/14), an empty invoice may be corrected only until the other party has deducted the input tax. WTS&Saja's experts describe empty invoice problems facing businesses and present the position of tax authorities and administrative courts as to when they can be corrected.

Puls Biznesu

The article describes issues with finding the right VAT rates for substitute (similar) goods. WTS&SAJA's experts discuss this matter in detail based on tax rulings. The statutory choice of VAT rates for food products is based on Polish classification of goods and services called PKWiU. This often results in a situation whereby products that from the consumer's perspective are similar are taxed using different VAT rates, such as due to minor differences in composition or different best-before dates or manners of supply to consumer. Higher VAT rates lead to higher prices, and this adversely affects competitiveness and demand.

Dziennik Gazeta Prawna

To increase the appeal of their offerings, many businesses apply rebates. Some of these are not granted to your direct customer but to the next one in the chain (indirect rebates). In such cases, companies are not sure how such a rebate should be treated and documented under the VAT Act. The authors use the most recent tax rulings to provide advice on the proper VAT treatment of a grant or receipt of an indirect rebate.

Puls Biznesu

The VAT Act has three deadlines for VAT refunds. WTS&SAJA's experts discuss each of them and identify the conditions on which it is available. The standard deadline is 60 days. If the taxable person has not had any taxable sales during the reference period, the applicable deadline is 180 days, but may be reduced back to 60 days on a written application accompanied by a bond. The shortest statutory wait time for a VAT refund is 25 days. However, this one is practically almost impossible to make use of due to the numerous and harsh availability requirements. According to a proposed VAT Act amendment introducing split payments, the reduced VAT refund deadline might soon become the standard one, albeit only for those who implement the proposed solutions.

Rzeczpospolita

The new transfer pricing reporting regulations require a CIT-TP report to be filed by taxpayers whose revenues or costs in the tax year concerned exceeded EUR 10 million. These disclosures are designed to help tax administration identify targets for their transfer pricing inspections. Defining a functional profile may be the hardest nut to crack during the CIT-TP completion process. The article characterises functional profiles of manufacturers, distributors, R&D firms and service providers. The authors also highlight the need to ensure that CIT-TP disclosures are consistent with annual tax return data. Inconsistencies may prompt the tax authorities to hold an audit.

Rzeczpospolita

WTS&SAJA's experts answer a reader's question on the income tax and VAT treatment of a situation where a post-lease car that was bought by a business lessee and has been used for his business purposes is now transferred for his private uses. The issue of whether or not such transfer is subject to VAT depends on this key consideration: Did the person have the right of deduction on purchase of the car? That particular reader did, so the transfer of the car for his private uses will be subject to VAT, even if the transfer occurs directly after his business has been suspended or closed down. As regards personal income tax, the transfer will not be taxed because there will be no income. However, if the car is sold within 6 years from the transfer, income tax will apply on the sale.

Rzeczpospolita

WTS&SAJA's expert comments on judgment of the Supreme Administrative Court dated 29 Jun 2017 (case no. I FSK 2030/15) regarding VAT refunds to travellers. The applicable refund procedure says that a retailer in Poland will refund VAT to a traveller if the traveller presents a TAX FREE document approved by customs authorities. The retailer does not have to verify the indented uses of the goods or how often they have been purchased by the traveller. No requirements of this kind are imposed on retailers under the VAT Act, other than the duty to make the refund. The court made it clear that it is the customs authorities that are required to conduct such a verification during the TAX FREE approval process to make sure that no VAT refund fraud is involved.

Puls Biznesu

The article discusses certain practical issues taxable persons face after the introduction of reverse charge in the construction industry with respect to services listed in Appendix 14 to the VAT Act. In accordance with the new law, reverse charge applies where such services are provided by subcontractors. But controversies emerged among businesses because the VAT Act does not define a subcontractor. In effect, the tax authorities have received plenty of tax ruling applications to address the matter. The authors refer to selected tax rulings to discuss the most important points of guidance from the authorities. For example, to identify the status of a subcontractor, you need to refer to statutory definition; also, reverse charge only applies where there are two works contracts: one between the owner/employer and the general contractor and the other between the general contractor and the subcontractor.

Puls Biznesu

1 June 2017 saw entry into force of changes introduced by the Act of 7 April 2017 to amend the Code of Administrative Procedure Act and certain other acts. This amending legislation makes changes to the procedure before administrative courts. Under the new law, the request to cure violation has been abolished as a step in the process of challenging private tax rulings. Instead, the appellant may proceed straight to filing a petition for judicial review of adverse ruling, thus cutting short the entire procedure by about 45 days.

Rzeczpospolita

The article describes new duties imposed in relation to carriage of goods pursuant to the Carriage of Goods By Road (Monitoring System) Act of 9 March 2017. In particular, it focuses on the goods covered by the monitoring system and the entities that transport them. The new law introduces a monitoring tool, which is the register of notifications (SENT) to hold data about all cases of relevant carriage. All the carriers involved in relevant carriage must register and provide updates using PUESC platform. A failure to comply with this legislation may result in sanctions being imposed on those involved in the carriage concerned.

Puls Biznesu

WTS&SAJA experts discuss controversies about accounting recordkeeping and state aid calculations in the case of companies franchised to do business in more than one special economic zone. According to the authors, businesses with several zone franchises should be entitled to keep a single set of accounting records for all the franchises and chronologically account for state aid in the form of CIT relief. Although this approach has been endorsed by courts, the tax authorities have a different view. They have consistently held since 2015 that companies doing zone business under several franchises should apply state aid limits for each franchise separately and, consequently, must keep separate accounting records for each franchise.

Rzeczpospolita

This article deals with adjusting wrong VAT rates on cash register receipts. The authors discuss how to correct receipts with understated or overstated VAT rates as well as explaining what to do when an exempt trader erroneously applies VAT rates on his receipts.

Puls Biznesu

The article is about record retention requirements for taxpayers who carry forward their losses for tax purposes. In accordance with the Taxes Management Act, you have to keep books and underlying documents until the end of the limitation period for the related tax claims, which generally means five years from the end of the calendar year in which the tax becomes due to be paid. But this rule does not apply to taxpayers carrying forward their tax losses. In their situation, the limitation period may effectively grow to even 11 years. Such taxpayers should accordingly retain their accounting records for a longer time. The absence of relevant records may trigger adverse consequences from the side of the tax authorities, including fiscal penal liability. If any of the required records are missing, you should do whatever is necessary to regain or restore them.

Gazeta Prawna

Sale of buildings or parts of buildings is generally exempt from Polish VAT. But there are exceptions. The authors explain when a supply of a building is exempt from VAT and what to do if only part of the property meets the exemption requirements.

Rzeczpospolita

The article explains the idea of having a tax representative for VAT compliance in relation to import of goods with destinations in EU countries other than Poland. Such a representative may assume the duties related to ensuring importer's VAT compliance and thus help the importer avoid the need to register for Polish VAT purposes. However, to use that option, you need to meet certain requirements, as discussed in the article.

Puls Biznesu

The article discusses an alternative solution for VAT on imports of goods, called simplified VAT compliance. The authors describe when it is open to taxable persons to apply simplified VAT compliance in relation to imports of goods. They also explain the benefits of this method, including the fact that there is no duty to physically pay the tax, which materially affects importers' liquidity position.

Rzeczpospolita

As of 1 January 2017, Polish law requires hold group documentation for transfer pricing purposes (master file). Businesses with prior tax year's revenue or expenses of more than the equivalent of EUR 20M should check if their groups prepare master files and whether the master files comply with Polish regulations. Non-compliant documentation should be amended as appropriate. Master files prepared in foreign languages should be translated into Polish in advance. The current master file regulations generate a number of practical issues and concerns so that taxpayers may have to take action to ensure compliance with the new requirements. 

Puls Biznesu

This article, which refers to employer-funded training for employees, discusses VAT consequences of such arrangements for employees, especially where they enter into training funding agreements with their employers. Such agreements usually require the employees to pay for the training if they terminate their employment before some pre-agreed date. The law does not expressly regulate such situations. It is not clear if such payment by employee to employer should be treated as payment for services. Indeed, the payment may be deemed to be in the nature of indemnity, in which case it will escape VAT. While the underlying agreement will have a major role in identifying the nature of the payment, the tax implications should always be reviewed on a case-by-case basis.

Puls Biznesu

The article touches upon the issue of what is called summary correcting invoices, focusing mainly on the requirements allowing such an invoice to be issued and on what it should contain. The authors also explain the benefits of using these invoices, the main one being that you do not need to issue a separate correcting invoice for each document you want to correct. The article also discusses another practical aspect of summary correcting invoices, i.e. the use of exchange rates to translate currency amounts stated  on the invoice. This matter is dealt with by reference to relevant pronouncements of tax authorities.

Rzeczpospolita

WTS&Saja experts discuss a situation whereby a tax group is terminated mid-month so that it must be ascertained who should account for payroll and depreciation expenses for that month. According to the authors, such expenses should be recognised by the group and, after it is terminated, by its member companies according to the number of days during which the group continued. Accordingly, payroll and depreciation expenses should be recognised by the group in proportion to the number of days it existed in the month concerned, and by each individual member of the group in proportion to the remaining number of days in the month, during which each group member operated as a separate taxpayer. 

Rzeczpospolita

New transfer pricing documentation regulations have been in force since 1 January 2017. There has been a major change to the framework governing the documentation requirement. Now the requirement depends on accounting revenue of the year for which the documentation is being prepared. Transactions with residents of tax havens are an exception because the threshold here is fixed at EUR 20K (regardless of your revenue). The article describes what triggers the requirement to prepare TP documentation for transactions with entities from countries or territories using harmful tax competition. The authors show what disclosures are required by the new law to be made in the documentation and provide guidance on how to demonstrate that the pricing used in transactions with tax havens is at arm's length.

Gazeta Prawna

Making advance payments is a common business practice. Generally, the receipt of an advance payment gives rise to a charge to tax under the VAT Act. Intra-Community transactions are an exception as here there is no charge to tax. The article discusses the VAT treatment of an advance payment where the recipient does not know the nature of the transaction at the time of receipt of the payment, i.e. is not sure whether the transaction will be a domestic or intra-Community supply. WTS&Saja experts recount the position of the Finance Minister on this matter, including its private tax ruling of 29 January 2016 where the authority held that such classification doubts cannot result in a situation whereby no charge to tax arises on the advance payment.

Puls Biznesu

In accordance with the VAT Act, if a taxable person issues an invoice, he must pay any tax stated in it, whether or not the invoice was issued correctly. An invoice issued incorrectly or in error may be treated as what is called an "empty" invoice. To avoid problems caused by issuing an empty invoice, such invoice should be cancelled. While the law does not provide for invoice cancellation, this option is allowed in practice as long as the invoice has not entered the stream of transactions. Once such an incorrect invoice reaches the recipient, whether or not a correcting invoice may be available depends on the specific case. The article offers a possible solution to this issue.

Dziennik Gazeta Prawna

The articles discusses how to properly establish for VAT purposes if a payment should be treated as a prepayment or as a payment for a partial supply. This is especially important for VAT because the tax point is different for these two kinds of payment. For prepayment, VAT becomes chargeable on receipt while for a partial supply this is on completion of the stage for which the partial payment was received. Importantly, with partial supplies, the parties should specify that a partial payment is received on completion of each stage and that such a payment is provided for with respect to each stage/part. The VAT Act does not define a prepayment so taxable persons are advised to use the approach of tax authorities as revealed in their private rulings. The authors discuss how the rulings define when a payment should be treated as a prepayment for these purposes.

Rzeczpospolita

This article by WTS&SAJA experts discusses how to properly classify services connected with immovable property and ensure their correct VAT treatment. Based on the Polish VAT Act and case law of the Court of Justice of the European Union, the authors describe the requirements which must be met for a service to be considered connected with immovable property. It is particularly important to properly determine the place of supply of services connected with immovable property because such services are governed by special place of supply regulations under the VAT Act. This in turn affects the determination of which of the parties to the transaction (seller or buyer) must account for VAT in relation to it.

Puls Biznesu

As of 1 January 2017, construction subcontractors have to apply the reverse charge mechanism. Thus, to ensure VAT compliance, both construction service providers and their customers must verify whether the particular service constitutes construction works under the new VAT Act regulations. WTS&Saja explains how to define construction works pursuant to the new law.

Puls Biznesu

Generally, a service becomes chargeable to tax when completed. However, there are doubts when that may be if the service is provided for a long time or in stages. Based on tax rulings, the authors explain that whether or not a service is deemed completed depends on its nature. And the nature (and hence completion date) can in turn depend on the kind of contract between the parties or the law applicable to provision of services of this kind. Where there is no specific agreement or law to apply, a service should be deemed completed when the last activity of the given part/stage of the service has been performed.

Rzeczpospolita

WTS&SAJA experts answer a reader's question on whether any VAT applies when you withdraw a car from your business to be used for your personal purposes. Referring to the VAT Act, the experts explained that this particular case should be seen in light of two scenarios. One is that the reader purchased the car as a private person not in business and then made the car an asset of her business which she took up after the purchase. In this scenario she did not have the right of deduction with respect to VAT charged to her on the purchase so she would not be required to apply VAT when withdrawing the car from business use, either. With reference to the other scenario, the authors explain that the case is completely different if the reader bought the car in business while being a taxable person for VAT purposes. In that case she did have the right of deduction and, even if she ultimately did not exercise that right, her withdrawal of the car from business use will be taxed for VAT purposes.

Puls Biznesu

This article discusses composite supplies and how they should be treated under the VAT Act. There being no detailed regulation on the subject, the authors refer to the courts and the tax administration case practice on when a supply can be considered composite. A composite supply is taxed in whole at a single VAT rate applicable to its principal supply element. The article also shows examples of wrong classification of transactions as composite supplies.

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