Changes to the VAT rates matrix in Poland
Magdalena Jaworska of MDDP sets out how the Polish VAT rates matrix has evolved to assist taxpayers.
As of July 1 2020, updated rules on the VAT rate matrix entered into force in Poland.The main intention of the updated rules is to move away from the application of the local statistical rules (i.e. Polish Classification of Goods and Services, dated 2008) in favour of:
The Combined Nomenclature (CN) or the Polish Classification of Construction Industry (PKOB) for goods; and
The existing Polish Classification of Goods and Services 2015 in regard to services.
Welcoming changes to the model
On the outset, the old Polish VAT rates matrix was inconvenient to taxpayers. The revision aims to change the old-fashioned system to make it more transparent, simple and user-friendly for Polish taxpayers.
The main disadvantage of the old system was that there were many discrepancies in VAT
rates for similar products, a concept which has been largely avoided in the unified EU VAT system. In addition, taxpayers had no tax toll which would protect them from using reduced VAT rates.
These aims were successfully achieved through the establishment of the updated Polish concept of VAT rates, which is based on three fundamental assumptions:
The adoption, as far as possible, of a single rate of taxation for entire CN chapters;
The adoption of the principle of reducing rates when it is necessary to change the rate for the goods concerned; and
The need to counterbalance the introduction of a simple matrix with rate increases for selected but few goods and services.
From this point of view, the new VAT rate matrix should be regarded as a step towards a better practice.
Binding rate information
Most cases of goods taxpayers are entitled to base on CN codes while determining VAT rates. Consequently, in this respect, special attention should be paid to determine the CN codes correctly at the moment of sale. The information provided by a supplier might be a crucial one, although it may not fully protect the taxpayer through a tax audit.
To be on the safe side, it is worth implementing a binding rate information (WIS) issued by the Polish tax authority, to attain proper statistical classification and applicable VAT rates.
The WIS is a type of a tax decision which contains a description of the good or service (or several goods or services in case of a complex supply in the meaning of VAT rules), as well as its statistical classification and the correct VAT rate. WIS shall be binding, not only for the applicant, though the protection will also be available to other taxpayers who sell the same item in a chain transaction. WIS is officially published and all taxpayers in Poland can use it to protect the applicable reduced VAT rate.
Generally, WIS is issued within a three month period. The application for issuing WIS should concern only one good or one service and costs PLN 40 ($10). Hence, there is no option to apply in the same motion for more than one specific item, even when there are very similar products.
The fundamental advantage of WIS is that it is binding for tax auditors. Thus, contrary to binding individual tax rulings issued before the new VAT matrix was implemented, the Polish taxpayers gain a good tool to protect their position in respect to reduced VAT rates.
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