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The most important changes in CIT and VAT

We are pleased to present to you the most important changes in the Polish Corporate Income Tax (hereinafter referred as CIT) and Value Added Tax (hereinafter referred as VAT), which are effective as of 1st January 2013.

CHANGES IN CIT ACT

The most significant amendments to the Corporate Income Tax Act apply to the tax treatment of leasing agreements and of tax costs resulting from invoices not paid on time.

Changes in leasing agreements

The most relevant provisions in lease contracts are as follows:

  1. the minimum period of real estate leasing contracts was shortened from 10 to 5 years,
  2. extension of the definition of a leasing agreement to cover also a leasing of perpetual usufruct of land,
  3. it is now officially accepted to change the parties of leasing agreement that takes place during the basic term of the agreement with no tax consequences.

Abovementioned changes apply to the leasing agreements, which were concluded after the 1th of January 2013.

Changes in the tax treatment of costs resulting from invoices not paid on time

There are new rules concerning tax treatment of costs when the taxpayer fails to meet its obligations with regard to payments to contractors.

Under new regulation, the taxpayer is obliged to decrease the tax costs from the invoice (bill) or other document, if he treated this expanses as tax deductible, and the invoice:

  1. was not paid within 30 days from the due date,
  2. if the settlement period is longer than 60 days and the payment has not been settled, upon expiry of a 90-day-period starting from the date when taxpayer treated such costs as tax deductible.

The reduction of the tax cost should be made in the month in which 30-day-period or the 90- day-period elapses. If the liability is settled after the tax deductible costs reduction, the taxpayer will be allowed to increase its tax deductible costs by the amount of such a reduction. The increase of the tax costs will be possible in the month in which the liability is settled.

Moreover, these regulation apply also to the partial settlement of liabilities and tax deductible amortization and depreciation write-offs.

Example I

On 16th January 2013 the taxpayer purchased a service (the invoice issued by the supplier). He treated certain expanse as a tax deductible cost in January. The due date is 14 days, therefore the payment should be made by 30th of January. The additional (accordingly to the new legislation) 30 days for making a payment elapses on 1th March 2013. In case of not paying for the invoice, the taxpayer is obliged to reduce the tax deductible costs in March.

After the reduction, if the liability is settled, the taxpayer is allowed to increase his tax deductible costs by the amount of such reduction.

Example II

The taxpayer purchased a service (documented by the invoice) on 30th January 2013 and at the same time he treated this expanse as tax deductible cost. The due date was is 100 days, so the invoice should be paid by 10th March 2013. If the taxpayer pays for the invoice upon expiry of a 90-day-period calculated from the date when these expenses were treated as tax costs (in this situation - 30th April 2013), there will be no obligation for the cost reduction.

In case of the failure to settle such expanses till 30th April 2013, the taxpayer is obliged to reduce his tax costs in April 2013.

Example III

On 10th January 2013 the taxpayer purchased a trade good (direct cost), so that he did not treated this expanse as tax deductible cost. The due date was set at 90 days, so the invoice should be paid by 10th April 2013. 30 days from due date elapses on 10th May 2013, in turn the 90 day period (in case of payments with settlement periods are longer than 60 days) elapses on 2nd May 2013.

If the taxpayer pays for the liability by 2nd May 2013, the obligation of tax costs reduction will not appear.

Example IV

On February the taxpayer purchased fixed asset and in this month he registered it at fixed assets account. The taxpayer write-offs started in March 2013. The due date of the purchase invoice is 14 days and it elapses in March 2013. The payment should be made on April 2013 (30 days from the expiry of the payment deadline), so that deductible cost reduction does not have to be done. The taxpayer did not pay for the liability in this term, so he is not allowed to treat depreciation write-offs as tax deductible cost in April. Moreover, he is obliged to reduce his tax cost by the amount of depreciation write-offs from March.

CHANGES IN VAT ACT

"Bad debt relief"

From 2013 a taxpayer (seller) may adjust (decrease) the VAT base and output VAT on supply of goods or services, where the debt will not be settled by the buyer within 150 days from the date of the due date. Moreover:

  1. it is no longer required to inform debtor about an intention to make the adjustment,
  2. there is no obligation to inform the debtor about making the tax adjustment.

In case of making the aforementioned adjustment the additional form (VAT-ZD), should be enclosed to the standard VAT return.

In turn, the debtor is required to adjust (decrease) the amount of input tax. It shall be made in the VAT return submitted for the period in which 150 days from the due date have gone. If the debtor does not make such a reduction, the tax office will impose a fine in the amount of 30% of input VAT resulting from the overdue invoice.

Intra-Community transactions

Receiving an advance payment before the intra-Community supply or acquisition of goods shall not result in the creation of the VAT liability.

Currency exchange

The new provisions enable to convert amounts used to determine the tax base specified in foreign currency using the exchange rate announced by the European Central Bank on the last day preceding the tax point date. The amounts in other currency than EURO shall be converted with the exchange rate for EURO, e.g. USD will be converted as follows USD/EUR - EUR/PLN.

There is still a possibility to convert amounts in foreign currency at the average rate of exchange announced by the National Bank of Poland as at the last working day preceding the tax point date.

Invoicing

The most of provisions regarding invoicing, which were implemented as of 1st January 2013, are facultative.

Details and information to be put on the invoice accordingly to the Polish regulations

From 2013 there is no obligation to describe invoices by using words „Faktura VAT", nevertheless there is still a possibility to do so.

Invoices should include the following data:

  1. seller's and buyer's names and surnames or names or abbreviated names of their companies and their addresses;
  2. tax identification numbers of seller and buyer; (theoretically NIP number shall be used for transactions with Polish entities and VAT-EU number for transaction with entities from other EU countries, in practice, because the only difference is prefix "PL" it is possible to simply use VAT-EU number);
  3. invoice number;
  4. day, month and year when the invoice was issued, whereas if this date is different than the date of the sale the invoice must include also the date of the sale; in case of a sale of the continuous character, the taxpayer can specify on the invoice the month and year of carrying out the sale provided that the date of issuance of the invoice is specified;
  5. name of good or service;
  6. unit of measure and the amount of sold goods, or a type of services supplied;
  7. unit price of good or service without amount of VAT (net unit price);
  8. value of goods or accomplished services that the sale concerns without amount of VAT (net value of sale);
  9. tax rates;
  10. sum of value of sales net of goods or services accomplished with a division into particular tax rates, tax-exempt and tax-free;
  11. tax amount from the sum of value of sales net of goods (services), with a division into amounts concerning particular tax rates;
  12. total amount of receivables with the tax due.

There is also a possibility to issue a simplified invoices, but only if a gross amount (including VAT) does not exceed 450 PLN or 100 EUR. Such an invoice does not need to include the following information:

  1. buyer's names and surnames or names or abbreviated names of its company and its address;
  2. unit of measure and the amount of sold goods, or a type of services supplied;
  3. unit price of goods or services without amount of VAT (net unit price);
  4. value of goods or services that the sale concerns without amount of VAT (net value of sale);
  5. total value of net sales of goods or services with a division into particular tax rates, tax- exempt and tax-free;
  6. VAT amounts on the total sales of goods or services, with a division into amounts concerning particular tax rates.

There is a possibility to issue an invoice in other language than Polish or with another currency than PLN, but the amount of tax (if shown on invoice) must be specified in PLN.

From 2013 there is no obligation to display a car registration number on fuel purchase invoices.

Starting from 1st January 2013 taxpayer may issue an invoice documenting several different transactions carried out with the same customer during the calendar month. Such an invoice has to be issued not later than on the last day of that month.

The invoices documenting cross-border supply of goods and services, should be issued not later than on the 15th day after the month following the month in which the goods or services were supplied.

Changing invoice documents

From 2013 there is no obligation to present on the corrective invoice the mistakes done on an original invoice. However, it is possible to put more information on that invoice.

The obligation to possess a confirmation that the correcting invoice was received by the purchaser, shall no longer apply.