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27 July 2020

SLIM VAT – simple and modern tax?

SLIM VAT is a set of proposed regulations prepared by the Ministry of Finance. The primary purpose is to further seal the tax system and reduce the time that taxpayers spend on fulfilling their duties regarding VAT.

The SLIM VAT project is currently a proposed amendment to the VAT Act. According to the announcement issued by the Ministry of Finance, the relevant legislative changes should be adopted later this year, with the expected date of entry into force in the first months of 2021.

Unlike the recent anti-crisis amendments introducing specific and temporal changes, the new regulations are to be set as permanent law. Taxpayers can expect simplifications aimed mainly at small and medium-sized enterprises.

The acronym SLIM was created from the words: simple, local, and modern. According to the Ministry of Finance, a new approach to VAT tax that is easy to handle and adjusted to the local specificity. It is also a “modern” tax, which means the implementation of new technological solutions and e-administration services will lead to a reduction in taxpayer responsibilities.

SLIM VAT – simplified invoicing?

SLIM VAT introduces two new regulations regarding corrective invoicing. According to Art. 106j of the VAT Act, such invoices are issued by taxpayers when:

  • a reduction was granted due to early payment or after the sale,
  • goods, packaging or payment (in whole or partial) has been returned before the sale has been finalized,
  • a mistake in the amount of tax or the price of the goods on the invoice happens.

When the said provisions come into force, VAT payers will be able to issue a simplified in-minus and in-plus corrective invoices.

In-minus corrective invoices. The changes concern resignation from the confirmation of the reception of corrective invoices. In other words, the agreement of the terms of transactions between contractors will be a sufficient basis for lowering the tax base, and an amount due. It will continue to be the buyer’s responsibility to correct the agreed input tax. According to the legislators, the said omission should have a positive impact on the timeframe of the transaction and will optimize the circulation of documents between the buyer and supplier.

In-plus corrective invoices. Following the new regulations, adjustments to increase the tax base can be made on an ongoing basis, in the period of issuing the correcting invoice, when there is already a premise for increasing the amount. Currently, no provision in the VAT Act regulates the method of settling in-plus corrective invoices. The SLIM VAT proposal will introduce a legislative framework on which the practice of making corrections can be based.

Export

SLIM VAT will extend the time limit for the export of goods to six months (the current limit is two months). However, the change concerns only the 0% rate on the advance payment for the export of goods.

Exchange rates

The ministerial proposal also focuses on the problematic situation that affects many entrepreneurs that operate within the VAT and PIT/CIT regulations. In practice, when settling and invoicing a given transaction, the entrepreneur was forced to use two separate exchange rates. For VAT, the time of issuing an invoice was a definitive factor, while for income tax, it is the time before the service is fulfilled.

The new regulations will give a possibility to choose the rate for VAT, so an entrepreneur can establish a common exchange rate for the settlement of VAT and PIT/CIT.

Other financial changes

The SLIM VAT concept also proposes two additional, relatively small changes that are worth mentioning:

  • the extension of the deadline for VAT deduction up to four months without the need for corrections (the current term is three months);
  • the increase of the VAT exemption limit for small-value gifts up to 20 PLN, which is a step towards the standard adopted in the EU.

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