VAT tax 2014 (part 5) - Other changes in VAT
As has been mentioned many times, 2014 is a time of fundamental changes in VAT regulations. After clarifying the issues related to the tax obligation, tax base or invoicing, it is time for new ones, which intrigue entrepreneurs just as much.
Subjective VAT exemption - changes 2014
The VAT exemption limit in 2014 has not changed and is still PLN 150,000. However, the regulations related to determining which sale should be included in the limit and when it is exceeded have been changed. Some of them should be classified as really cosmetic - clarifying, while others should be classified as slightly more important, having a huge impact on the current settlements of entrepreneurs.
Subjective exemption - clarification
One of the least radical changes is the specification of the principles of subjective dismissal. Modification of Art. 113 paragraph. 1 of the VAT Act generally has no major impact on the settlements of non-VAT payers.
Taxpayers whose value of taxable sales did not exceed the total amount of PLN 150,000 in the previous tax year are exempt from tax. The amount of tax is not included in the sales value.
Sales by taxpayers whose sales value did not exceed the total amount of PLN 150,000 in the previous tax year are exempt from tax. The amount of tax is not included in the sales value.
The difference between the previous and the present treatment is only that, from 2014, the exemption applies to "sales by the taxpayer" and not the taxpayer himself.
Setting a turnover limit
As is clear from the above-mentioned Art. 113 paragraph. 1 of the VAT Act, the sales value without the tax amount is included in the limit. Wherein paragraph 2 of the aforementioned provision specifies directly which of the transactions the entrepreneur does not take into account when determining it.
Art. 113 sec. 2.
Up to the value of the sale referred to in paragraph 1, does not include:
1) intra-Community supply of goods and mail order sales from the territory of the country and mail order sales within the territory of the country;
2) delivery of goods against payment and provision of services against payment, exempt from tax pursuant to art. 43 sec. 1 or regulations issued on the basis of art. 82 sec. 3, with the exception of:
a) real estate transactions,
b) services referred to in Art. 43 sec. 1 points 7, 12 and 38-41,
c) insurance services
- if these activities are not ancillary transactions;
3) the supply of goods against payment, which, on the basis of the provisions on income tax, are classified by the taxpayer as fixed assets and intangible assets subject to depreciation.
Who cannot take advantage of the subjective exemption?
The catalog of taxpayers who are not exempt due to the sales volume was expanded at the beginning of 2014. And so, according to Art. 113 paragraph. 13 of the Act, this exemption does not apply to taxpayers:
1) making deliveries:
a) goods listed in Annex 12 to the Act,
b) goods subject to excise duty, within the meaning of the provisions on excise duty, with the exception of:
- electricity (PKWiU 22.214.171.124),
- tobacco products,
- passenger cars, other than those mentioned in point (a) e, classified by the taxpayer, pursuant to the provisions on income tax, as fixed assets subject to depreciation,
c) buildings, structures or parts thereof, in the cases referred to in Art. 43 sec. 1 point 10 lit. a and b,
d) construction areas,
e) new means of transport;
2) providing services:
b) consultancy, with the exception of agricultural consultancy related to the cultivation and breeding of plants as well as animal breeding and breeding, as well as related to the preparation of a plan for the development and modernization of a farm,
3) who do not have the seat of economic activity in the territory of the country.
When does the taxpayer lose the right to a subjective exemption?
The amended provisions of the VAT Act clearly define the moment when the entrepreneur loses the right to personal VAT exemption. Because according to Art. 113 paragraph. 5 of the VAT Act, the exemption ceases to apply starting from the activity in which the limit amount (PLN 150,000) has been exceeded. Importantly, the entire activity contributing to exceeding the limit is subject to taxation.
This rule also applies to taxpayers who started their activity during the year, in this case, however, the amount of the limit is determined proportionally to the period of conducting the activity (Article 113 (10) of the Act).
Subjective VAT exemption - resignation
Entities exempt from VAT may voluntarily waive the exemption even before exceeding the sales volume limit. For this purpose, a VAT-R registration form must be submitted to the relevant Tax Office. Currently, the registration fee is approx. PLN 170. The request for resignation must be submitted before the month from which the resignation is to take place.
In order to deduct tax on purchases made before waiving the exemption, the taxpayer no longer has to make a physical inventory. Importantly, the output VAT is also reduced by input VAT in relation to goods not sold until the day of resignation from the exemption. Only they will be considered to be used for taxable activities, so one of the basic conditions giving the right to deduct VAT will be met.
Amendments to the regulations determining the proportions of the deduction of input tax
If the taxpayer uses the purchased goods for both taxable and VAT-exempt activities, he is in principle also obliged to separately determine the amounts of input tax related to the activities for which he is entitled to reduce the amount of output tax.
If it is not possible to single out all or part of the amounts, the taxpayer may reduce the amount of tax due by such part of the amount of input tax that can be proportionally assigned to activities for which the taxpayer is entitled to reduce the amount of tax due.
How to determine the proportions?
The proportion is determined as the share of the annual turnover for activities in relation to which the taxpayer is entitled to reduce the amount of tax due, in the total turnover obtained from activities in relation to which the taxpayer is entitled to reduce the amount of tax due, and activities in connection with which the taxpayer has no such right.
It is defined as an annual percentage based on the turnover achieved in the year preceding the tax year for which the proportion is established. This proportion is rounded up to the nearest whole number.
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Online advice for businessesThe turnover on the basis of which the proportion is determined, as in 2013, does not include the turnover obtained from the supply of goods and services, which are classified by the taxpayer as fixed assets and intangible assets subject to depreciation, as well as land and rights to perpetual usufruct of land, if they are included in the taxpayer's fixed assets - used by the taxpayer for the purposes of his business (Article 90 (5) of the Act).
Importantly, Art. 90 sec. 6 of the VAT Act, which so far caused taxpayers many problems with interpretation related to the notion of "sporadically". Starting from 2014, we are clear on this matter, because apart from the above-mentioned turnover used to determine the proportion, the turnover from transactions regarding:
ancillary real estate and ancillary financial transactions;
services listed in art. 43 sec. 1 point 7, 12 and 38-41, to the extent that these transactions are ancillary (e.g. management services of investment funds and collective securities portfolios; loan or cash loan services and intermediation services in the provision of credit or cash loans) as well as credit or cash loan management by the lender or lender).
Art. 43 sec. 1 point 7.
transactions, including brokerage, in currency, bank notes and coins used as legal tender, with the exception of collector banknotes and coins which are considered gold, silver or other metal coins and banknotes which are not normally used as legal tender for payment or which have a numismatic value;
Art. 43 sec. 1 point 12.
a) investment funds and collective securities portfolios - within the meaning of the provisions on investment funds,
b) the investment portfolios of the investment funds referred to in point (a). a, or part of them,
c) insurance capital funds within the meaning of the provisions on insurance activity,
d) open pension funds and voluntary pension funds within the meaning of the provisions on the organization and operation of pension funds, as well as the Guarantee Fund established on the basis of these provisions,
e) employee pension programs within the meaning of the provisions on employee pension programs,
f) a compulsory compensation scheme and a clearing fund established under the provisions of the law on public trading in securities, as well as other funds and funds that are collected or created to secure the correct settlement of transactions concluded on the regulated market within the meaning of these provisions or in trading on commodity exchanges within the meaning of the provisions on commodity exchanges, by a central partner, a settlement agent or a clearing house within the meaning of the provisions on settlement finality in payment and securities settlement systems and the principles of supervision over these systems;
Art. 43 sec. 1 point 38.
credit and cash loan services and intermediation services for the provision of credit or cash advances, and the management of credit or cash loans by a lender or lender.
Article 42 (1) (39).
and brokerage services relating to the provision of sureties, guarantees and any other security for financial and insurance transactions, and the management of credit guarantees by a lender or a lender.
Article 42 (1) (40).
money deposit, money account services, payment transactions of all kinds, money orders and transfers, debts, checks and bills of exchange, and brokerage services relating to the provision of these services.
Article 42 (1) (40a).
services, including brokerage services, the subject of which are shares in:
b) entities other than companies, provided that they have legal personality
- with the exception of the storage and management services for these shares.
Article 42 (1) (41).
services, the subject of which are financial instruments referred to in the Act of 29 July 2005 on trading in financial instruments (Journal of Laws of 2010 No. 211, item 1384 and of 2011 No. 106, item 622) and No. 131, item 763), with the exception of the storage and management of these instruments, and brokerage services in this regard.