On the 23 September 2016, the Polish Ministry of Finance published an amendment draft to the Value Added Tax (VAT) Act, the Tax Ordinance Act and the Penal Fiscal Code, which if impacted will be effective from the 1st January 2017.

Below is a selection of the key most important changes:

  1. A 30% penalty will be issued to any taxable business that either understates output VAT or overstates input VAT on their VAT returns. A 100% penalty will be issued if any falsified invoice not representing real transactions is discovered. These penalties will apply if the tax office uncovers these inconsistencies during an audit.
  2. The scope of the reverse charge mechanism is being extended to construction services that are provided by foreign subcontractors and Polish taxable businesses.
  3. Withdrawal of the VAT exemption for ancillary services comprising part of insurance and financial services.
  4. Elimination of the option to file quarterly. This will affect all large taxpayers as well as entities just starting to conduct business and are still within their first year of activity.
  5. New VAT exemption threshold increases from PLN 150,000 to PLN 200,000.
  6. Mandatory e-filing for some entities e.g. taxpayers carrying out intra-Community transactions which are covered by reverse charge system.
  7. New additional conditions for short-term VAT refunds within 25 days. For instance, there is a particular focus on bank account payments, submission of proof of bank transfer and having a 2-year VAT registration tenure.
  8. A registration deposit, ranging from PLN 20,000 to PLN 200,000, may be imposed for some businesses when they commence their trading activities if these activities determine their need to register for VAT. Two examples of such entities are businesses at risk of tax arrears and those using virtual offices.
  9. Concerning intra-Community acquisitions:
  • A deduction for input VAT will be possible provided there is also output VAT reported on the VAT return for the filing period in which the VAT issue arises.
  • When output VAT is not reported within three months of the VAT issue, it will no longer be possible to retrospectively report the input VAT.