On October 1st, 2021, an amendment to the VAT Act called "SLIM VAT 2” package came into force.
At the same time, we would like to draw your attention to the fact that some of the provisions included in the SLIM VAT 2 package (including the provisions on "neutral" settlement of intra-Community acquisition of goods and import of services) have already come into effect as of 7 September this year.
Below we present a summary of the most important changes provided in the SLIM VAT 2 package:
- Changes in settlement of intra-Community acquisition of goods and import of services
The amendment removed provisions which made deducting input VAT in the same accounting period in which VAT due was shown dependent on showing the VAT due within 3 months after the end of the month in which the tax obligation arose. This change came into force a day after the publication of the amending Act, i.e. on September 7th this year. In practice this means that VAT adjustments due to import of services and intra-Community acquisition of goods will again be settled in a "neutral" manner (i.e. as it was before 2017). The lack of specific transition provisions governing the adjustment of periods prior to the effective date means that the new regulations should also apply to periods prior to September 7, 2021 that are adjusted after the effective date of the regulations.
At the same time, it should be emphasized that in the case of intra-Community acquisition of goods, the provisions will still apply according to which the condition for the deduction of input VAT on intra-Community acquisition of goods is the receipt of invoice within 3 months from the end of the month in which the tax obligation with respect to the purchased goods arose. If such an invoice is not received, the input VAT will have to be adjusted in the period in which the 3 month time limit to receive the invoice expired. On the other hand if the taxpayer receives the invoice after the period of 3 months, he will be able to deduct the VAT (to show input tax) in the same period in which he declared the tax due.
Furthermore, provisions have been introduced to regulate the reduction of the tax base related to import of services and intra-Community acquisition of goods (i.e. recognition of the adjustment in minus) - in case of reduction of taxable amounts due to import of services and intra-Community acquisition of goods, the adjustment will, in principle, have to be recognized in the month in which the reason for the reduction occurred.
- Changes in deadlines for VAT deduction through adjustment of returns
In case of non-deduction of input VAT "on a current basis", i.e. in the settlement period in which the right to deduct VAT arose or in the following 3 settlement periods (in case of small taxpayers - 2 settlement periods), taxpayers will have the opportunity to deduct the non-deducted VAT by submitting a correction to tax return for:
- the period in which the right to deduct VAT arose, or
- for one of the next 3 settlement periods in which the right to deduct VAT arose (in case of small taxpayers for one of the next 2 settlement periods, after the settlement period in which the right to deduct VAT arose).
- Changes to the so-called "bad debt relief in VAT"
The amendment to the VAT Act modifies the rules of applying the "bad debt relief" by:
- reduction of the conditions for taking advantage of this relief - the creditor will have the possibility to take advantage of the relief also in the situation when the debtor is in liquidation, undergoing restructuring proceedings or in bankruptcy;
- extension of the deadline for taking advantage of the relief - the new deadline will be 3 years from the date of issuance of the invoice documenting the debt, counting from the end of the tax year in which the invoice was issued;
- It will also be possible to take advantage of the bad debt relief when the purchasers are not VAT registered as active VAT taxpayers, i.e. consumers or taxpayers exempt from VAT (provided that the requirements set forth in the VAT Act are met).
- Changes in the disposal of funds on VAT accounts
The new regulations will allow taxpayers to transfer funds held in a VAT account to other VAT accounts held with other banks. Currently, this possibility applies only to VAT accounts held with one bank.
- Changes regarding the determination of the "moving supply" in chain transactions
For chain transactions defined as intra-community delivery of goods and export, a rule has been introduced to determine the "moving supply", according to which:
- in case the transport is organized by the first supplier, the dispatch or transport of the goods should be attributed to the supply organized by this supplier,
- in case the transport is organized by the last purchaser, then the dispatch or transport should be attributed to the delivery to this purchaser.
- Changes with respect to the rules of renouncing the VAT exemption on supply of buildings or structures, referred to in Article 43(1)(10) of the VAT Act
The amendment introduces the possibility to make a statement on the choice of VAT taxation in the notarial deed, concerning the supply of immovable property.
- Changes in VAT settlements on importation under simplified procedure
Taxpayers using a simplified procedure will be able to make an adjustment to the tax return within four months, starting from the month following the month in which the tax obligation in respect of the import of these goods arose, if they have not accounted for the tax correctly in the original tax return.
At the same time, if a taxpayer fails to account for VAT in a correct manner (in full or in part) and fails to timely file an appropriate correction to the tax return, he will lose the right to account for VAT in the return - in such a situation, the taxpayer will be required to pay VAT with interest.
- Changes concerning the submission of VAT-26 information
Taxpayers who use motor vehicles exclusively for economic activity, for which they are obliged to keep records of the mileage of vehicles, will have time to submit to the head of the tax office information on these vehicles by the 25th day of the month following the month in which they incurred the first expense related to these vehicles, but no later than the date of submission of the records.
Should you have any questions or doubts regarding changes in SLIM VAT 2 package, do not hesitate to contact Mazars Tax Advisory Department.