2 December 2022

VAT groups – conditions and benefits of the new form

VAT Groups is a new solution for companies from the financial sector, allowing for joint VAT settlements and the use of the resulting benefits. However, many conditions must be met to make organizing into VAT groups profitable for member entities.

In July this year, the Ministry of Finance initiated a discussion on the draft clarifications to the provisions on VAT groups. The result of these consultations was a document explaining the provisions on VAT groups, covering such issues as creation, registration, rules of taxation, and dissolution of groups.

The regulations will come into force on January 1st, 2023.

Who can create a VAT groups?

As a rule, VAT groups can be formed by VAT payers with their registered office in the territory of the Republic of Poland. If the entity does not have its registered office in the country, the qualifying condition may be having a branch located within the country, provided that the scope of activities conducted by this branch is the same. Please note that member entities can only belong to one VAT group at a time.

Conditions to be met – linking entities

A new form can only be created by entities that are related financially, economically, and organizationally.

Each of these three factors must occur simultaneously, although one selected aspect may contribute to the fulfillment of each particular condition, as discussed below.

A financial relationship exists when one of the following facts can be stated in the case of one of the taxpayers from the VAT group:

  • owning more than 50% of the shares in the share capital of each of the other taxpayers who are members of the group; or
  • holding more than 50% of voting rights in control bodies; or
  • having more than 50% of the profit-sharing rights.

An economic link can also be established based on three factors, where it is sufficient for member entities to meet one of them:

  • entities from the VAT group conduct the economic activity of the same nature;
  • types of economic activity of entities must be complementary and interdependent;
  • all members of a VAT group benefit from each other’s economic activities carried out by one of the members.

These terms, such as the nature, complementarity, and interdependence of types of economic activity, are defined in the Act.

An organizational link exists when the members of a VAT group act economically wholly or partly in concert, or when they are under common management (in law, in fact, directly or indirectly).

The above conditions must be met continuously throughout the entire period of operation of the VAT group (the period when the group has the status of a taxpayer).

What’s to gain by becoming a member of a VAT groups?

Organizing in the form of a VAT group certainly entails a lot of administrative and formal obligations, so it is worth asking yourself what are the benefits of the new form of a tax entity.

First of all, all members of the VAT group become one taxpayer under the law, which allows the use of the same procedure for settling the tax on goods and services. Several aspects of this should be kept in mind. The number of administrative obligations will certainly decrease (e.g. group members will be able to issue accounting notes and other documents without VAT, despite the obligation to keep records of transactions).

Another important argument is the possibility of submitting one JPK_VAT file as a VAT group, instead of several individual files from each entity separately. This may translate into more effective financial liquidity for group members.

Transactions between members of the VAT group will not have to be carried out with the help of split payment, and there will be no need to verify the counterparty in the list of taxpayers. Most importantly, however, members will not have to pay VAT on intra-group transactions, since the group, according to the latest regulations, will not have to settle based on VAT invoices.

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ARPI Accounting is a part of ARPI Group, a Norwegian holding which started to operate in Poland in 2001.