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Polish Lower House Approves VAT Split Payment Rules

by Ulrika Lomas, Tax-News.con, Brussels

25 July 2019


On July 19, 2019, the lower house of the Polish parliament, the Sjem, approved legislation to introduce a mandatory value-added tax split payment mechanism on certain supplies and to reduce rates of VAT on numerous goods and services, including electronic publications.

Under the split payment mechanism, when a taxable person acquires goods or services from another taxable person, the portion of the payment to the supplier that is VAT will be deposited separately and automatically to a dedicated account of the seller (an r-VAT account), to satisfy the VAT required to be remitted to the tax agency. The net amount for the transaction will be received by the seller. The amount deposited in a r-VAT account will earn interest for the vendor and may be used to satisfy its VAT obligations.

The Polish split payment mechanism will be mandatory for supplies that are currently subject to the reverse charge mechanism, including:

  • steel;
  • fuel;
  • construction services;
  • European Union emissions trading allowances;
  • automotive parts and accessories;
  • coal and coal products; and
  • electronic machinery and equipment and their parts.

In addition, the legislation will cut VAT rates on numerous basic items, including:

  • tropical and citrus fruit from eight to five percent;
  • certain bread products from 23 or eight percent to five percent;
  • soups, broths, and homogenized food from eight percent to five percent;
  • mustard, sweet pepper spice, and some processed spices from 23 to eight percent;
  • baby and infant products including baby food, nappies, and car seats from eight to five percent; and
  • adult hygiene products from eight to five percent.

Furthermore, the legislation reduces VAT on e-books from 23 to five percent, and on electronic news from 23 to eight percent.

The mandatory split payment mechanism and the reduced VAT rate for electronic publications will apply from November 1, 2019.

TAGS: compliance | VAT rates | tax | value added tax (VAT) | interest | VAT legislation | food | internet | legislation | Poland | construction | services | VAT compliance matters | Europe

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