VAT groups within the “Polish Deal” programme

A bill of the Minister of Finance, Funds and Regional Policy concerning amendments to the tax legislation introducing the “Polish Deal” (Polski Ład) was published on 26 July 2021 (hereinafter the “Bill”).  The key change as regards VAT is the possibility to form the so-called VAT Groups for tax purposes as of 1 January 2022.

According to the Bill, taxpayers who meet all of the following conditions will be allowed to form a VAT Group:

• they are established:
  • in Poland or
  • abroad – to the extent they conduct business through a branch located in Poland,
• are related financially, economically and organisationally to each other within the meaning of the laws specified in the Bill.

Therefore, the possibility to form a VAT Group will not be connected with participation in a “tax capital group” (PGK) governed by the CIT Act.

A VAT group may be formed for a period of not less than 3 years and, throughout its duration, uninterrupted relations must exist between members of a VAT group. These are understood as:

• financial relations – one member of the Group holds more than 50% of shares in the share capital of the other members;
• economic relations – when:
  • the core business of the VAT Group’ members is of the same nature, or
  • the business activities carried out by members of the VAT group are complementary and interdependent, or
  • a member of the VAT Group carries out activities which benefit wholly or largely other members of the VAT Group,
• organisational relations – when:
  • members of the VAT Group are legally or actually, directly or indirectly, under joint management, or
  • Members of the VAT Group organise their activities entirely or partly upon mutual agreement.

In addition, according to the Bill, the composition of a VAT Group may not change during its term.

The Bill also defines the rules according to which a VAT Group is to operate, e.g. the VAT Group is to be represented by a VAT Group representative, with respect to its tax obligations arising from the VAT Act, the General Tax Act, Taxpayer Records And Identification Act and the National Tax Administration Act.

The main objective behind a VAT Group is that all members handle their tax compliance duties for VAT purposes together, while intra-group transactions are not subject to VAT. This means that:

• Supply of goods and services between members of the same VAT Group with taxable status is not subject to VAT.
• Supply of goods and services to a member of a VAT Group will be considered transactions for that Group.
• Transactions concluded with an entity from outside the Group will be treated as if they were concluded by the Group.

Members of a VAT Group shall be jointly and severally liable for its VAT liabilities during the period in which the VAT Group holds a taxable status for VAT purposes and after the group loses such status.

The Bill is currently in the consultation phase. We will keep you informed about the further progress of the legislative work in this respect.

This blog post is provided for general information purposes to keep you up-to-date with changes in tax law, tax rulings by authorities, case law of courts and interesting commentaries.
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