Poland introduces a new VAT rate system starting from April 1, 2020
Contributed by Accace
23 October, 2019
On August 29, 2019, the Polish president signed an Act which introduces a new matrix of VAT rates and further changes on the taxation of goods and services. The current system, often addressed as problematic, will be replaced by the new starting from April 2020.
Identification of the VAT rate
According to the new regulation, in order to determine the VAT rate, goods will be identified by a Combined Nomenclature (Nomenklatura Scalona) while services will be subject to the Polish Classification of Products and Services of 2015, eliminating the previous problematic classification from 2008.
The new system enables the identification of reduced tax rates based on an entire section of Combined Nomenclature instead of being based on an individual product, which currently leads to situations where similar goods are classified according to various rates due to small differences in the product. For example, according to the current problematic system, a doughnut can be subject to a VAT rate of 5%, 8% or 23%, based on ingredients (glazed with chocolate or sprinkled with poppy seeds) or shelf life (up to 14 days only or for longer period). The new system eliminates these discrepancies and provides a unified approach.
The Combined Nomenclature was created by the European Council by merging the Common Customs Tariff and Nomenclature of Goods for the External Trade (NIMEXE), supplemented by the Explanatory Notes. It is a common way of classification widely used in the European Union in international trade, also for the purposes of importing or calculation of custom duties. Furthermore, it liberates Polish entrepreneurs from the burden of using two different classification systems for goods in both domestic and foreign trade.
New VAT rates
In order to adopt a single tax rate for entire groups of products, a new matrix of VAT rates will be introduced. The reduced rate of 5% will be applicable to all types of bread and cakes, tropical and citrus fruits, soups and broths, food and other articles for babies and toddlers and hygienic articles, while 8% will be applicable to a selection of spices. Increased rates will be imposed on some unprocessed spices in the amount of 8% and a 23% rate on specific seafood and ice.
Rate information with binding force
So far, when taxpayers had problems with determining the appropriate VAT rate, they could turn to the Centre for Classifications and Nomenclatures authorities for an opinion which had no binding force, ultimately resulting in applications for a higher VAT rate for safety's sake.
In order to help determining the correct tax rate, Poland introduced a new institution which will provide an administrative decision, or in other words, the so-called binding rate information (Wiazaca Informacja Stawkowa). The information will be issued upon the taxpayer's request with a fee of PLN 40, while the service will be provided without undue delay, but no later than 3 months after the submission of request. The binding rate information and the related request without the taxpayer's identification data will be published in the Public Information Bulletin of the National Tax Information.
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