Not only the PIT tax has seen changes this year. As of November 1, 2019, changes in the Value Added Tax (VAT) are coming into effect. This is the first part of changes regarding this tax. The next ones are expected to come into effect on January 1, April 1, and July 1, 2020. What changes are coming into effect now?
Replacement of the reverse charge mechanism with the split payment mechanism
Starting from November 1st, the reverse charge mechanism for transactions will be replaced by the split payment mechanism. This means that the way transactions are settled will change. New rules for documenting payments included in Annex No. 15 of the VAT Act are also being introduced, along with sanctions for their violation. From November 1st, domestic transactions subject to reverse charge mechanism will be covered by the split payment mechanism, also known as MPP or split payment. Pursuant to the provisions of the Act of August 9th, 2019 amending the VAT Act and some other acts, Article No. 17, paragraph 1, points 7 and 8 of the VAT Act, which defined the cases in which the purchaser of goods and services listed in Annex 11 and 14 of the VAT Act had to settle the due tax, was repealed. Additionally, the provisions of Article 86, paragraph 2, points 4, letter a and b of the VAT Act, which converted the amount of tax settled under the reverse charge into an accrued one, were changed. At the same time, changes were introduced to Article 108a, paragraphs 1a-1e of the VAT Act, which require the purchaser of goods and services to pay the tax resulting from the invoice marked as ‘split payment mechanism’ to the VAT account when the transaction is carried out in Poland between two VAT taxpayers, the payment covers goods and services listed in Annex No. 15, and the one-time transaction exceeds 15,000 PLN.
The new Annex No. 15 of the VAT Act
Starting from November 1, a new Annex No. 15 to the VAT Act is also in force. Currently, it will cover:
- goods and services previously subject to reverse charge according to Annexes 11 and 14 of the VAT Act;
- goods previously subject to joint liability of the buyer according to Annex No. 13;
- transactions concerning parts of motor vehicles, coal, all electrical devices, machinery, and their parts
Transactions concerning the above-mentioned goods and services, once all conditions are met, are subject to the split payment mechanism
Transitional provisions
Since the above-mentioned changes will come into effect on November 1st, questions arise about the settlement of transactions made before the implementation of these changes, but their effects will occur after the changes take effect. This concerns situations where the transactions were made under the old regulations, but their documentation or the obligation to pay tax arises after the new regulations come into force. The transitional provisions of the amending act are crucial here. According to these provisions, transactions related to goods and services listed in Annexes No. 11 and 14 of the VAT Act, which were made before the changes came into force and for which an invoice was issued or a tax liability arose after the changes, will still be settled under the previous rules. Additionally, transactions made after the changes take effect but with an invoice issued before the changes will also be settled under the previous rules. Deliveries of goods previously subject to reverse charge will be characterized by the date of the VAT payment obligation on the day of delivery of these goods, and the invoice should be issued no earlier than 30 days before the delivery of the goods and no later than the 15th day of the month following the month in which the delivery was made.
The above provisions may be quite complex for many individuals. As mentioned earlier, this is just the beginning of the changes regarding the Value Added Tax (VAT), with the remaining changes being gradually introduced in the coming year. Entrepreneurs who are VAT payers will therefore have to face significant changes in the near future, which will come into effect during the current tax year.