Dziennik Gazeta Prawna

While the VAT Act lays down general rules of taxation of bare land, commercial practice shows that, with the huge variety of real-life transactions, these general rules are not enough to resolve all doubt. In effect, businesses often find it difficult to properly treat supplies of land for VAT purposes. WTS&SAJA experts describe the general VAT rules applicable to supplies of land and use the most recent case law to explain when such transactions may raise concerns and what to do in such cases, such as in the case of a sale of land with parts of somebody else's building on it.

Puls Biznesu

The basic deadline for tax authorities to reimburse VAT is 60 days. However, they often delay beyond that deadline on the basis that additional verification of the refund claim is necessary. A ruling to extend the time for a VAT refund should state clear reasons and enabling law for such extension (see SAC judgment of 20 March 2019 in case no. I FSK 97/19). The ruling must above all explain the need for inquiring into additional circumstances and give the party a notice of the specific inquiries that have been or will be made in that regard. The ruling should also enable the party to understand which parts of its VAT reporting have given rise to suspicions on the part of the authority. Note that the power to extend the time for VAT refunds is a substantial departure from the taxable person's right to obtain timely reimbursement of VAT. As such, it should be exercised only exceptionally and for compelling reasons.

Puls Biznesu

The Polish SAF-T mechanism (JPK_VAT) has been in use for VAT reporting for over three years now but businesses are in for changes in JPK_VAT schemas (file structures). The Parliament has enacted a law introducing a new structure for JPK_VAT, with effect from 1 Apr 2020 for large enterprises and from 1 Jul 2020 for others. The new JPK_VAT file will combine the previous structure with form VAT-7/VAT-7K. The new schema will be a challenge for taxable persons as they will have to use the pre-set sale document type codes and goods/services group codes to duly classify their documents and transactions. Early IT implementation of the new structure is advised so that you are well-prepared for ensuring the proper filing.

Rzeczpospolita

If there is an error in an invoice, it should generally be corrected by issuing a correcting invoice. For practical purposes, a cancellation procedure is used for invoices with errors or issued in error so that both the original and the copy are struck through and a note is inserted to prevent reuse. But this solution is only acceptable in an exceptional situation where the invoice involves a non-existent transaction and has not yet been used for legal purposes. According to tax authorities (see, e.g., tax ruling of 21 March 2019, ref. 0111-KDIB3-1.4012. 12.2019.2.RSZ), an invoice has not been used for legal purposes if it has not been sent to the customer or was sent to and received by the customer who however has sent it back without recording it and the supplier now holds  both the copy and the original. Note that you cannot cancel e-invoices once you have sent them (tax ruling of 22 January 2019, ref. 0112-KDIL4.4012.629.2018.1.NK).

Rzeczpospolita

Following the recent amendments to the CIT Act, there will be two procedures for reclaiming tax withheld at source: the old procedure under the Tax Code, applicable to tax withheld from up to PLN 2 million in payments made by a withholding agent during one tax year; and a new procedure, introduced into the CIT Act, applicable to tax withheld on any further payments above the threshold of PLN 2 million made by a withholding agent during one tax year. The article discusses basic differences between these two procedures, including as to the application form, the refund deadline, the formal and substantive application requirements, and interest on untimely refunds.

Rzeczpospolita

The thin capitalisation restrictions in force as of 1 January 2018 apply to borrowing costs which exceed 30% of tax EBITDA, subject to a safe harbour of up to PLN 3 million. The CIT Act provisions that define borrowing costs are clear that these include also "the interest element of a lease payment". However, there is no express mention of the kind of lease arrangements that is meant and of the law that governs it. The authors resolve this issue based on latest case law of Provincial Administrative Courts (cases no. I SA/Gd 1130/18, I SA/Wr 651/18) where it was held that the only kind of lease arrangement for which the CIT Act splits a lease payment into interest and principal is the financial lease. Accordingly, the thin cap restrictions should be interpreted to apply to financial leases only and to no other kind of lease. At the same time, the article notes the established taxpayer-unfriendly case practice of tax authorities which rule that thin cap restrictions apply to both financial leases and operating leases under income tax legislation. According to the authors, it would be reasonable to address this problem by reference to Article 2a of the Tax Code, which says that unresolvable doubts as to the meaning of tax law must be held to operate in favour of taxpayers (in dubio pro tributario).

Puls Biznesu

As a supplier, you cannot recognise your correcting invoice with a downward adjustment if its receipt has not been acknowledged by the customer. Acknowledgment of receipt is relatively straightforward in the case of paper invoices. However,  these documents are increasingly often issued and sent by electronic means (e.g. by email). A question arises what kind of acknowledgement of receipt would then be appropriate. The authors offer an answer based on latest case law, including the Supreme Administrative Court's judgment of 5 Feb 2019 in case no. I FSK 230/17, where it was held that the receipt of an invoice is sufficiently evidenced if the IT system sends a notice that the invoice reached the recipient's mailbox (autoresponder).

Puls Biznesu

There have been changes in Polish transfer pricing regulations as of 1 January 2019. One of the new mechanisms is the so-called safe harbour for intercompany loans. Entities complying with these safe harbour requirements have simplified TP documentation duties while the new mechanism will protect them against additional income assessments. However, it must be remembered that use of these safe harbour provisions qualifies as a reportable arrangement for MDR purposes.

Dziennik Gazeta Prawna

The article discusses the issue of a taxable person planning to move goods out of Poland and out of the EU territory. The person had doubts about how to correctly treat the transaction in terms of whether or not it is an export of goods for the purposes of VAT Act. In this context, the article describes the requirements all of which must be met for a transaction to be treated as exportation subject to Polish VAT. In addition, the article also reviews the treatment of transactions as exports under customs law as well as outlining VAT Act regulations on how to determine the place of such supplies. Two options considered by the taxable person are presented: transfer of goods to a warehouse outside the EU and transfer of goods outside the EU and their ultimate assembly in the country of destination.

Rzeczpospolita

The article is concerned with how to evidence exports (movement of goods outside EU) to ensure it may be zero-rated for VAT purposes. The VAT Act lists example documents which may be used for the purpose. However, both tax authorities and courts have spoken on numerous occasions about what alternative documents are available. These can include, for example, an export accompanying document (EAD) with an import declaration or an IE-599 message from the customs authorities of the other UE country. Importantly, such alternative documents must be official and must clearly identify the exported goods.

Rzeczpospolita

A VAT adjustment filing must be made if you identify a compliance error or an unreported transaction. The right to adjust your VAT return is available until the end of the tax claims limitation period. However, there are doubts if this right also applies after you are deregistered as a non-exempt taxable person for VAT purposes. This matter has been in the spotlight of tax authorities and courts on numerous occasions. The article gives examples of how tax authorities have ruled to deny the right of adjustment to deregistered taxable persons and how courts have confirmed that such a right must be available until the end of the period of limitation.

Rzeczpospolita

Where a VAT reclaim needs to be additionally verified, the tax authorities may extend the refund time until the verification process is over. Generally, such extension of time for a refund will be effective if the extension order is duly served on the taxable person before expiry of the original refund deadline. Accordingly, the conclusive date is the date of service and not the date of issuance. However, this rule does not apply where the taxable person abuses process delivery rules, e.g. by evading receipt. In such cases, effective extension will be counted from the date of issuance of the order, not the date of its service. According to the Supreme Administrative Court (see judgment of 10 Oct 2018, case no. I FSK 1701/16), this kind of bad faith conduct does not deserve protection.

Dziennik Gazeta Prawna

2019 saw radical changes to Polish transfer regulations. One of them was the introduction of safe harbour provisions for low-value-adding services. Subject to certain conditions, the tax authorities will not be allowed to impute income (loss) based on business support services (e.g. accounting, IT) supplied to or by the taxpayer. One of the conditions is that the taxpayer must have a calculation describing and explaining the kind and amount of these costs and the related allocation keys. However, the law is unclear about what such a calculation should look like precisely. Taxpayers may turn to OECD Guidelines for help on this.

Puls Biznesu

Businesses are generally entitled to deduct 50% of VAT charged to them in connection with their expenses on passenger cars. A deduction of 100% of the tax is available where the vehicle is used entirely for business purposes. To confirm that it is, businesses must have business car use policies and keep mileage logs. However, even putting livery on the car with the company logo, name and offering will not be sufficient to ensure full deduction if neither the car use policy nor the mileage log is in place (see Supreme Administrative Court's judgment of 5 Dec 2018, case no. I FSK 2045/16).

Puls Biznesu

The article discusses the CJEU case law and the Polish case practice on the issue of whether taxable persons are entitled to deduct VAT charged to them in connection with an investment project that has been subsequently abandoned. The authors also deal with various practicalities, such as those relating to project documentation.

Puls Biznesu

The article describes the rules in force as of 2019 in relation to VAT adjustments for uncollectible debt. Under the new law, the wait time until the debt is considered likely to be uncollectible has been cut short from 150 days to 90 days, allowing businesses to recover their VAT quicker, provided they meet all the other VAT Act requirements (these remain unchanged).  The article also discusses the practical application of interim provisions, including the issue of which debts from 2018 should be governed by the new rules.

Puls Biznesu

The article discusses the deductibility of expenses incurred on staff integration events. Until the end of 2017, the tax authorities consistently held that it is safe to deduct all such expenses in full. However, some rulings appeared in 2018 where the tax authorities denied such deductibility for expenses representing the involvement of staff (and their families) who are not on contracts of employment under labour law (i.e. staff working on contracts under civil law or as independent contractors). The reason given was that such expenses should rather be treated as entertainment expenses. It appears the authorities might want companies to divide their staff event costs according to a key ensuring that those unrelated to employees proper are not deducted. However, if an event is organised for the purpose of integrating the entire staff regardless of the kinds of their contracts and thus facilitating an increase in the company's income, then there are strong arguments to claim that all the event-related expenses should be deductible and the company will have a good case when defending against tax authorities' claims to the contrary.

Puls Biznesu

The article discusses the treatment of audit services for Polish withholding tax purposes. The services of foreign auditors are not expressly mentioned in the CIT Act. According to the current approach of tax authorities, such services should not be treated as being similar in nature to any services expressly mentioned in the CIT Act. Therefore, payments for services of foreign auditors should not generally be subject to Polish withholding tax. However, each case must be reviewed on its individual merits subject to the actual contract that has been made and the course of its performance.

Rzeczpospolita

This article discusses the matter of moving goods from Poland to a logistic warehouse in another EU Member State. Among other things, this solution cuts delivery times needed for the goods to reach their customer. The VAT Act has no special rules on the treatment of such supplies, giving rise to doubts among businesses. The Supreme Administrative Court tackled the problem in case no. I FSK 1500/16 (judgment dated 21 September 2018). The Court ruled that when specific goods are being delivered to a logistic warehouse and the final customer is known at the time of their despatch, such a supply is to be treated as one continuous intra-Community supply of goods. 

Rzeczpospolita

On-line sales of goods and services are becoming more and more popular. While such mode of sale brings plenty of advantages for both the seller and the buyer, its VAT treatment is often a point of controversy. The article discusses such matters as the timing of the charge to tax in supplies of goods via courier or postal operator and in supplies of services. In addition, it deals with what documents are required to be issued in such supplies when made to taxable persons versus individuals not in business. Given the various controversies discussed in the article in relation to different aspects of internet sales, you are advised to give such a business a careful consideration before embarking on it so as to make sure that the correct VAT treatment is applied to the transactions involved.

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