New tax measures for 2019–2020 are reviewed in this article, focusing on selected changes we believe will significantly affect the business environment. They concern almost every type of tax and therefore merit a closer look.
August 2019: PIT exemption for young people
The Ministry of Finance estimates that almost two million taxpayers will pay no income tax at all. This concerns people under 26 working under employment contracts or contracts of mandate. Young entrepreneurs running their own businesses cannot claim the exemption. Revenue
up to the upper limit of the first tax band, PLN 85,528, is exempt. Any excess is taxed under the progressive scale. According to the Ministry’s calculations, young people will gain between PLN 133 and PLN 564 a month, saving up to PLN 6,768 annually. The PIT exemption applies to income earned from 1 August this year. Given the date on which the rules enter into force, the qualifying revenue limit for 2019 is exceptionally PLN 35,636.67.
Young taxpayers will not feel the benefit of the government’s proposed relief until 2020. From August to the end of December, employers will continue deducting PIT advance payments from their salaries. These will be refunded in April 2020 when their 2019 PIT is settled.
September 2019: VAT taxpayer whitelist
The VAT taxpayer whitelist launched on 1 September. Its purpose is to allow checks on prospective business partners and reduce the risk of becoming involved in tax fraud. It combines existing VAT taxpayer lists, including the ‘blacklist’ of, among others, taxpayers removed from the VAT register. It also contains information on businesses whose VAT status has been restored and on active and exempt VAT taxpayers.
What has changed? Before 1 September 2019, taxpayers could independently check a business partner’s status only at the time of the enquiry, not, for example, when an invoice had been issued. The new list will allow checks for a selected date up to five years earlier. It will also show businesses’ bank account numbers. Crucially, transfers to an account other than one on the list will prevent the expenditure from being treated as tax-deductible, for payments exceeding PLN 15,000 for particular goods or services. A taxpayer transferring money to an unchecked account will also be jointly and severally liable with the counterparty if the latter proves fraudulent.
The new sanctions will apply only from 1 January 2020.
October 2019: major PIT cut from 18% to 17%
As many as 25 million taxpayers are expected to benefit from the reduction in PIT from 18% to 17% from October 2019. It will benefit those taxed under the progressive scale: employees, contractors under contracts of mandate, retirement and disability pensioners, and business owners. Those paying flat-rate income tax or lump-sum tax will naturally not benefit. The reduction applies only to revenue within the first tax band. Earnings of up to PLN 85,528 will therefore be subject to 17% PIT, with the excess taxed at the usual 32%.
How much can be saved? First, remember that the PIT cut, like the exemption for young people, does not remove the obligation to pay ZUS contributions. Someone earning the minimum wage of PLN 2,250 gross will save PLN 472 a year. A person earning the average income of PLN 4,765 will save slightly more: PLN 732 a year. The tapering tax-free allowance, ranging from PLN 8,000 to zero, will remain unchanged. However, the amount deducted from the tax due will fall from PLN 1,440 to PLN 1,360 in 2020.
October 2019: higher tax-deductible employment expenses
The Act reducing PIT also increases deductible expenses. Taxpayers will benefit both from the rate cut from 18% to 17% and from more than doubling the standard employment expense deduction. What does this mean? Relief for businesses. At present, the basic employment expense deduction is PLN 111.25 a month, capped at PLN 1,335 a year. For commuters, it is slightly higher: PLN 139.06 monthly and PLN 1,668.72 annually. For people with multiple jobs, the annual deduction cannot exceed PLN 2,002.05, or PLN 2,502.56 if they commute. These amounts have applied since 2008. A local employee, meaning one who does not commute to a workplace in another town and holds one job, will deduct PLN 3,000 a year from the tax base instead of PLN 1,335. A commuting employee will deduct PLN 3,600 instead of PLN 1,668.72.
People with more than one job can also expect higher deductions:
• PLN 4,500 a year instead of PLN 2,002.05 for non-commuters with multiple jobs;
• PLN 5,400 instead of PLN 2,502.56 for commuting employees.
Monthly deductions, calculated as one twelfth of the annual deductible
employment expenses, will consequently change:
• from PLN 111.25 to PLN 250 for a local employee with one job;
• from PLN 139.06 to PLN 300 for a commuting employee.
November 2019: mandatory split payment
Split payment is not new: the mechanism has been familiar since at least July 2018. It works by directing the part of a payment for goods or services corresponding to the net sale value to the supplier’s settlement account. The VAT portion is paid into the supplier’s special bank account, the VAT account. Until now, however, this payment method has not been mandatory.
From November 2019, split payment will be mandatory in sectors considered most exposed to tax fraud. The legislature has identified, among others, electronics, steel, construction, coal and scrap. A seller subject to mandatory split payment will not be able to exclude it in an agreement with the buyer. Payments below PLN 15,000 will be an exception. If the parties fail to comply, both buyer and seller will face a 30% VAT sanction.
Mandatory split payment also brings income tax changes. A taxpayer who purchases goods or services that must be paid for using split payment, but fails to do so, will not be able to deduct the expenditure as a business expense. If the expenditure is recognised for tax purposes on the basis of the purchase invoice, but payment is made in a subsequent tax period by ordinary transfer rather than the special transfer instruction, the costs will have to be adjusted in the period in which payment is made.
Mandatory split payment will replace the reverse-charge mechanism previously used in those sectors. Under the proposed wording of Article 106e(1)(18) of the amended Act, a taxpayer undertaking a transaction listed in Annex 15 with a value exceeding PLN 15,000 must add ‘mechanizm podzielonej płatności’ (‘split payment mechanism’) to the sales invoice. A taxpayer previously using ‘odwrotne obciążenie’ (‘reverse charge’), for example for construction services, will have to replace it with ‘mechanizm podzielonej płatności’ once the rules enter into force.
January 2020: no invoice without the buyer’s NIP on the receipt
The President has already signed the amendment changing how invoices are issued. Obtaining an invoice on the basis of an ordinary fiscal receipt will no longer be as straightforward. From 1 January 2020, an invoice may be issued against a receipt only if the receipt includes the buyer’s tax identification number (NIP). Otherwise, both parties risk penalties of up to 100% of the tax payable, and the buyer will be unable to deduct VAT from that invoice.
January 2020: one account number for tax payments
Simplification is on the way. Taxpayers will pay CIT, PIT and VAT, among other liabilities, through their own individual tax bank account. Currently, tax offices have separate accounts into which taxpayers pay. Simply relocating a business may mean having to use a different account. From 2020, the system should become simpler. Under the amended Tax Ordinance provisions, taxpayers and withholding agents will be given an individual tax account for payments of personal income tax, corporate income tax, VAT and non-tax liabilities forming state budget revenue.
April 2020: new JPK_VAT and abolition of separate returns
Businesses are already familiar with the Standard Audit File for Tax. It has proved so effective as a means of communication between businesses and tax authorities that the legislature has concluded that VAT returns are no longer needed. In 2020, the forms will be replaced by a new JPK_VAT file. Its structure will include taxpayer identification details, the period covered by the return or correction, and information establishing the amount of tax. The records section will reflect transaction history, with purchase and sale dates and the applicable tax rates. Businesses will also include counterparties’ details and invoice numbers. The new JPK file will remove the need to submit VAT-7 and VAT-7K returns and their attachments, VAT-ZZ, VAT-ZD and VAT-ZT. These forms will be replaced by additional fields in the new JPK_VAT structure.
April 2020: new VAT rate matrix
Work on organising VAT rates is still under way. The new matrix is intended to apply from April 2020, assigning goods and services to the correct VAT rates. It would also change the rates applicable to certain goods and allow confirmation of the correct rate through Binding Rate Information (WIS).
Traditional fiscal cash registers and paper receipts are being phased out: 2020–2022
VAT taxpayers using traditional registers will soon have to replace them with online fiscal cash registers. This change should reduce inspections and business obligations. Eventually, all traditional paper-roll registers will be replaced by online devices, giving the National Revenue Administration information on every transaction. Businesses in the automotive sector must buy new registers by the end of 2019. Restaurateurs, among others, must do so by the end of June 2020. Hairdressers, beauty salons and dental practices must replace theirs by the end of 2020. Ultimately, old-style registers will disappear from the market at the end of 2022.
September 2019: from 1 September 2019, the VAT Act expands the categories of taxpayers ineligible for the turnover-based VAT exemption.
The amendment adds taxpayers supplying:
(a) the following goods under a contract concluded through an organised distance-contracting scheme, without the parties’ simultaneous physical presence and using exclusively one or more means of distance communication up to and including conclusion of the contract:
– cosmetic and toilet preparations (PKWiU 20.42.1);
– computers, electronic and optical products (PKWiU 26);
– electrical equipment and non-electric household appliances (PKWiU 27);
– machinery and equipment not elsewhere classified (PKWiU 28);
(b) parts sold wholesale or retail for:
– motor vehicles (PKWiU 45.3);
– motorcycles (PKWiU 45.4).
Taxpayers providing debt collection services, including factoring, are also ineligible for the exemption under Article 113 of the VAT Act.
From 1 September, the VAT Act formally confirms the interpretation of first occupation of property long predominant in practice and case law
First occupation is now understood as a taxpayer starting to use a building, structure or part thereof for its own needs. Under the previous wording, first occupation occurred only when the building was made available for use through a VAT-taxable transaction, such as a lease subject to VAT.
