Changes to registration for VAT as from January 2017

10 January 2017

A law whose purpose is, first and foremost, to improve VAT collection ratio is currently at an advanced stage of the legislation process. Additionally, it aims to verify the list of entities registered as active VAT payers. The draft act is a harbinger of several changes to the rules of registration as a VAT payer, as well as signing off. Presented below are some of the changes regulating this aspect of business operation.

  1. More stringent regulations with respect to VAT payer registration

The legislative body wants, first and foremost, to introduce tools making it possible to more effectively screen business entities applying for VAT registration as well as entities already included in the register.

The tax authority will be entitled to refuse tax payer registration if it turns out that the data provided in the tax payer’s application is untrue, a given business entity does not exist or there is no possibility of contacting it.

Furthermore, the tax authority will be able to delete already registered entities from the VAT register. The new laws will enable the tax authority to delete a business entity from the VAT payer register without a need to notify the tax payer of this fact. The most important of the new premises are the following:

  • submitting for 6 consecutive months or 2 consecutive quarters of VAT declarations in which sales and purchases with tax amounts to be deducted were not declared,
  • issuing invoices or corrective invoices which did not substantiate actual actions,
  • conducting business operations while being aware or having justified grounds to presume that the business entity is participating in a fraudulent or tax misappropriation practice aiming to attain undue financial gain at the expense of the state budget.
  1. Removing tax payers from the register of active tax payers parallel to retaining them in the register with the status of payers exempt from VAT

As from the New Year, tax authorities are to obtain a capability of removing active payers performing only actions exempt from VAT from the VAT payer register.  At the same time, such tax payers will be kept in the register with the status of payers exempt from VAT. It applies to situations where tax payers have declared in the tax declarations they submit only sales exempt from VAT pursuant to art 43. of VAT Act for 6 consecutive months or 2 consecutive quarters but have failed to submit a relevant update notification with the tax office.

The above principle will not apply to situations where it transpires from the tax payer's explanation that the lack of sales other than those exempt from VAT in their declaration is connected with the specificity of their business operation as opposed to their ceasing to perform transactions other than exempt ones. In such cases, it will be also possible to restore registration of a tax payer as an active VAT payer without a need for a formal application.

  1. Introduction of the proxy's joint and several liability

The legislator introduces regulations according to which the proxy of a business entity under registration will be liable for the newly registered VAT payer's tax arrears over the first six months from the registration. In this case, the proxy's liability would not exceed the amount of 500,000 PLN and will not apply to situations where tax arrears were not originated in connection with the entity that performs sales participating in dishonest tax settlement aiming to attain a financial gain.

  1. Increase in the subjective exemption limit to 200,000 PLN

As from January 1 2017, the legislator intends to increase the limit of subjective exemption to 200,000 PLN. So far, the limit has amounted to 150,000 PLN. Eligible for the limit will also be tax payers who:

  • attained total sales worth over 150,000 PLN but not more than 200,000 PLN in 2016;
  • began performing taxable actions in 2016, and whose total sales value in proportion to the period of their business operation was more than 150,000 PLN but did not exceed 200,000 PLN.

The rules specified above are only part of the whole package of the planned VAT modifications. The changes introduced aim to increase the income of the state budget by limiting the operation of business entities being an element of the so-called "tax merry-go-round", i.e. activities aiming to obtain VAT under false pretences.

Apart from the issues presented above, the draft act includes other regulations, e.g. burdening tax payers with new obligations, changing settlement methods, as well as toughening sanctions in the Penal and Fiscal Code.