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9 December 2019

New VAT rates matrix

Polish entrepreneurs have been waiting several years for the simplification of the VAT rate matrix. It seems that there will finally be a change. A simple and straightforward matrix of VAT rates, the Combined Nomenclature (CN), which introduces new rate values, will start to apply from April 1st, 2020.

The Combined Nomenclature

The CN, commonly used in EU countries, solves many issues caused by the PKWiU 2008 (the system that is now obligatory in Poland). The most criticized aspect of the current system is certainly the lack of unification in tax rates for specific groups of products. Different VAT rates for related products makes it difficult for entrepreneurs to identify and apply the correct rate. The new CN system is an attempt to regulate and adjust the matrix to the European Union standards.

The adjustment required changes in the rate, thus an increase or decrease in their value for selected goods. The great news for entrepreneurs is that, for the most part, the downsizing principle has been applied, which means lower rates for related goods, although it has not been done without a few increases.

VAT rates 2019

It is worth noting that the Combined Nomenclature covers only goods (in a commercial sense). For all services eligible for VAT settlement, the updated PKWiU system will apply. The government has provided a list of goods for which the VAT rate will change:

Reduction of the VAT rate to 5%:

  • tropical and citrus fruits, some types of nuts;
  • all types of bread, including cookies;
  • cereals, flour, starch or milk products;
  • books in all forms (printed, e-books, stored on data carriers);
  • soups, broths, homogenized and dietetic foods;
  • food products for infants and children, teats, nappies, and car seats;
  • personal hygiene articles.

Reduction of the VAT rate to 8%:

  • mustards and some processed spices;
  • newspapers, journals, and magazines in all formats (printed, e-books, stored on data carriers).

VAT rate increase includes:

  • selected unprocessed spices – from 5% to 8%;
  • specialist magazines (except regional and local) – from 5% to 8%;
  • shellfish, mollusks, and aquatic invertebrates, as well as preparations and meals in which they are an ingredient – from 8% to 23%;
  • ice used for food storage and refrigeration – from 8% to 23%.

Preparing for the change

How can a company prepare for tax rate matrix change? First of all, the insertion of new VAT rates according to the CN and PKWiU 2015 to every accounting system will be the most important matter and a first task to perform. All new contracts signed after April 1st, 2020, should already contain new rates. It will also be a good idea to review older business relationships and agreements – changes that come into force on April 1st may affect the value of goods and services that will be subject to a settlement.

The regulations introducing the new VAT rate matrix came into force on November 1st, 2019, although we must wait for its actual application until April 1st, 2020.

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

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