VAT Primer
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Poland's accession to the European Union will have a significant impact on the Polish fiscal law, that including customs, value added tax as well as income tax. Obviously, most of the forthcoming changes spring directly from the stellars upon which the European Union has been built, that being, among others, the customs union, free transfer of goods and services, and (close to) uniform value added tax system.
This, of course, is to make the lives of investors and entrepreneurs in Poland easier and surely it will. However, as it always happens with any inter-temporary periods, before the changes become the day-to-day reality, much needs to be overcome.
Introduction of the customs union will mean free release of the goods for trade within the current and new EU countries. One should not forget, however, that in order to benefit from this, origin certificates that would confirm the EU origin of the goods will be required in many cases. This refers to goods under certain customs procedures, such as transit or temporary customs clearance which will be terminated after the Poland's EU accession. On the other hand, other customs procedures, for example inward processing, will be continued (as a rule, until they expire) under the customs regulations binding before Poland's accession. The replacement of SADs (the customs declarations used at present) with INTRASTAT ones, especially bearing in mind that electronic transfer of data for the purposes of the latter is to be introduced, might also bring some confusion.
Another important area is the new Value Added Tax Law. In general it does reflect the EU directives and most of the solutions, in particular those for transfer of the goods between the EU countries, follow the patterns already worked out in the EU. Thus, export and import of goods, as called today, with the EU member states, will now be referred to, respectively, as the intra-EU supply of goods and the intra-EU acquisition of goods. While the rules of their taxation remain similar to those currently binding, it should be noted that appropriate documenting of the transactions is crucial for benefiting from the 0 percent rate applicable to the intra-EU supply of goods. Also, one should not forget about the obligation to obtain EU tax identification number (the so-called NIP EU) required for any transaction involving transfer of goods (and some services) within the 25 EU countries.
Moreover, it is expected that the new definition of supply of services (which covers any transaction which does constitute a supply of goods), that replaces the currently binding definition based on statistical classifications, should raise a lot of questions both from Polish taxpayers and Polish tax authorities as to the taxability of some of the transactions. This assumption is grounded on the fact that the new definition broadens significantly the scope of the VAT taxation in Poland. It covers, among others, such areas as obligations to refrain from an act and assignment of intangible property (including licenses of any kind), that is transactions that at present are subject to VAT not at all or to a limited extent.
Taxation of supply of services to other than Polish purchasers will also depend much on the place of supply as provided for by law. The concept, to be introduced upon May 1st, is well known to the present EU members but will need to be implemented into the Polish system.
A welcome change to the Polish VAT Law is the VAT payer's right to obtain a direct refund of the excess input VAT without the need to carry this excess forward to the next monthly settlements. A much less welcome change, in particular from an accountant's point of view, is the obligation to adjust the deduction of input VAT at the end of each fiscal year on the basis of the VAT ratio (the VAT deductible proportion). For fixed assets the adjustments will need to be executed annually for a period of ten years (real estate) or for five years (other fixed assets).
Similarly as with customs, a new VAT evidence obligation will arise, this time regarding intra-EU transactions, in the form of quarterly summing information declarations.
It comes as a relief to say that the revolution in the area of income tax has not been so grand. The two Polish acts on personal and corporate income tax have been developed for quite a few years already to fit the EU directives, thus one should not expect too many surprises. However, the issue of the exemption on the withholding tax on dividends paid out by a Polish company to a EU-based shareholder still remains unclear with regard to the point in time from which the exemption applies.
There is little doubt that the forthcoming months will be a hardworking time for investors in Poland. Not only will they need to embrace the changes introduced to the Polish fiscal system (as well as other areas), but they will also deal with many questions and much confusion that will shadow frequently the initial period of Poland's EU membership. This, however, seems to be the price that needs to be paid in order to make things better.
Agnieszka Rzepecka is a fully qualified tax adviser at the Haarmann Hemmelrath office in Warsaw, where she has practiced as a tax adviser since 2002. She graduated from Warsaw University, Law Faculty.
Poland's accession to the European Union will have a significant impact on the Polish fiscal law, that including customs, value added tax as well as income tax. Obviously, most of the forthcoming changes spring directly from the stellars upon which the European Union has been built, that being, among others, the customs union, free transfer of goods and services, and (close to) uniform value added tax system.
This, of course, is to make the lives of investors and entrepreneurs in Poland easier and surely it will. However, as it always happens with any inter-temporary periods, before the changes become the day-to-day reality, much needs to be overcome.
Introduction of the customs union will mean free release of the goods for trade within the current and new EU countries. One should not forget, however, that in order to benefit from this, origin certificates that would confirm the EU origin of the goods will be required in many cases. This refers to goods under certain customs procedures, such as transit or temporary customs clearance which will be terminated after the Poland's EU accession. On the other hand, other customs procedures, for example inward processing, will be continued (as a rule, until they expire) under the customs regulations binding before Poland's accession. The replacement of SADs (the customs declarations used at present) with INTRASTAT ones, especially bearing in mind that electronic transfer of data for the purposes of the latter is to be introduced, might also bring some confusion.
Another important area is the new Value Added Tax Law. In general it does reflect the EU directives and most of the solutions, in particular those for transfer of the goods between the EU countries, follow the patterns already worked out in the EU. Thus, export and import of goods, as called today, with the EU member states, will now be referred to, respectively, as the intra-EU supply of goods and the intra-EU acquisition of goods. While the rules of their taxation remain similar to those currently binding, it should be noted that appropriate documenting of the transactions is crucial for benefiting from the 0 percent rate applicable to the intra-EU supply of goods. Also, one should not forget about the obligation to obtain EU tax identification number (the so-called NIP EU) required for any transaction involving transfer of goods (and some services) within the 25 EU countries.
Moreover, it is expected that the new definition of supply of services (which covers any transaction which does constitute a supply of goods), that replaces the currently binding definition based on statistical classifications, should raise a lot of questions both from Polish taxpayers and Polish tax authorities as to the taxability of some of the transactions. This assumption is grounded on the fact that the new definition broadens significantly the scope of the VAT taxation in Poland. It covers, among others, such areas as obligations to refrain from an act and assignment of intangible property (including licenses of any kind), that is transactions that at present are subject to VAT not at all or to a limited extent.
Taxation of supply of services to other than Polish purchasers will also depend much on the place of supply as provided for by law. The concept, to be introduced upon May 1st, is well known to the present EU members but will need to be implemented into the Polish system.
A welcome change to the Polish VAT Law is the VAT payer's right to obtain a direct refund of the excess input VAT without the need to carry this excess forward to the next monthly settlements. A much less welcome change, in particular from an accountant's point of view, is the obligation to adjust the deduction of input VAT at the end of each fiscal year on the basis of the VAT ratio (the VAT deductible proportion). For fixed assets the adjustments will need to be executed annually for a period of ten years (real estate) or for five years (other fixed assets).
Similarly as with customs, a new VAT evidence obligation will arise, this time regarding intra-EU transactions, in the form of quarterly summing information declarations.
It comes as a relief to say that the revolution in the area of income tax has not been so grand. The two Polish acts on personal and corporate income tax have been developed for quite a few years already to fit the EU directives, thus one should not expect too many surprises. However, the issue of the exemption on the withholding tax on dividends paid out by a Polish company to a EU-based shareholder still remains unclear with regard to the point in time from which the exemption applies.
There is little doubt that the forthcoming months will be a hardworking time for investors in Poland. Not only will they need to embrace the changes introduced to the Polish fiscal system (as well as other areas), but they will also deal with many questions and much confusion that will shadow frequently the initial period of Poland's EU membership. This, however, seems to be the price that needs to be paid in order to make things better.
Agnieszka Rzepecka is a fully qualified tax adviser at the Haarmann Hemmelrath office in Warsaw, where she has practiced as a tax adviser since 2002. She graduated from Warsaw University, Law Faculty.
