Changes in VAT exemptions in 2014

Entrepreneurs may use the right to a subjective exemption from tax on goods and services until the end of 2013. So far, there was a limit of PLN 150,000. What changes in the regulations await us in 2014? Below we answer the most dubious issues.

Subject exemptions from VAT in 2013

Taxpayers may be exempt from tax if the value of the taxable sale did not exceed the total amount of PLN 150,000 in the previous tax year. Please note that the tax amount is not included in the sales value. This issue arises from Art. 113 paragraph. 1 of the VAT Act.

Turnover and VAT exemptions in 2014

Art. 113 sec. 1 of the VAT Act will be modified next year. The most important change concerns the exemption from tax of sales made by taxpayers whose sales value did not exceed PLN 150,000 in the previous year. Please note that the tax amount is not included in the sales value.

An important issue in relation to the above, is to pay attention to the difference in the wording of Art. 113 paragraph.1 - the taxpayer's sale will be exempt from the new year, and not - as before - the taxpayer.

Setting the limit of VAT exemption in 2014

It follows from the above provision that the net value of sales, excluding tax, is included in the exemption limit.

Art. 113 sec. 2 of the article specifies which elements the taxpayer will not have to take into account when taking into account the tax exemption limit. Until the end of 2013, the taxpayer did not include in the sales value:

• paid delivery of goods and the provision of tax-exempt services,
• goods classified by the taxpayer as fixed assets - under the provisions on income tax - and legal and intangible assets that are subject to depreciation.

At the beginning of 2014, this article will be expanded to include further elements, so that taxpayers will not have to include:

1. mail order sale from the territory of the country and mail order sale within the territory of the country, as well as intra-community delivery of goods,

2. the paid delivery of goods and the paid services that have been exempt from tax pursuant to art. 43 sec. 1 or regulations issued on the basis of art. 82 sec. 3. The exception here is:

• real estate transaction,
• insurance services,
• services specified in art. 43 sec. 1 points 7, 12 and 38-41, including: management services of investment funds and collective securities portfolios, intermediation services in the provision of credit or cash loans, credit or cash loan services,

- if these activities are not ancillary transactions,

3. paid delivery of goods, classified by the taxpayer as fixed assets and intangible assets subject to depreciation - on the basis of the provisions on income tax.

It should be remembered that the term "auxiliary activities" is not precisely defined by any regulations, which in 2014 may cause growing disputes between taxpayers and the tax office.

Changes in the loss of the right to VAT exemption in 2014

At the time of losing the right to personal exemption from VAT, the taxpayer is obliged to tax the surplus of sales over the limit - in accordance with art. 113 paragraph. 5 of the VAT Act. The entrepreneur may, with the consent of the head of the tax office, reduce the amount of tax due by the amount of input tax resulting from customs documents and by the amount of tax paid on intra-Community acquisition of goods, as well as by the amount of input tax resulting from invoices being proof of purchases made before the date of loss of the exemption. However, the condition for the discussed situation is:

• preparation of a physical inventory of the inventories of these goods that the taxpayer had on the date of exceeding the amount of PLN 150,000,
• submission of the physical inventory to the tax office, no later than 14 days from the date of loss of the VAT exemption.

The change in force since January 2014 says that after the limit is exceeded, the exemption will expire starting from the activity in which the amount was exceeded, and not as before - when this amount is exceeded. The taxpayer will therefore have to tax the entire value of sales that caused the limit to be exceeded. It is worth presenting the discussed situations with examples.

Example 1.

In 2013, the taxpayer benefiting from the VAT exemption achieved sales of PLN 140 thousand. zloty. In the same year, another transaction for the amount of PLN 15 thousand was made. zloty. Due to the limit of 150 thousand. PLN, the taxpayer is obliged to tax only the surplus from the amount of 155 thousand. PLN, so 5 thousand. zloty.

Example 2.

In 2014, the taxpayer benefiting from the VAT exemption achieved sales of PLN 148 thousand. zloty. In the same year, another transaction was made for the amount of PLN 3,000. zloty. Due to the limit being exceeded, the entrepreneur is obliged to tax the entire transaction for the amount of PLN 3,000. PLN due to the fact that it contributed to the surplus.

From 2014, Art. 113 paragraph. 5, in which the provision on the obligation to prepare a physical inventory and submit it to the tax office in the event that the taxpayer wants to deduct VAT from the expenses for the purchase of goods, incurred before the loss of the VAT exemption, will be deleted.

The issue of returning to the VAT exemption in 2014

A taxpayer who has lost the right to exempt sales from VAT or has voluntarily resigned from it, has the right to re-use the exemption due to turnover, but not earlier than one year after the end of the year in which he lost the right to exemption or from it voluntarily resigned.

It is important that, in the opinion of the tax authorities, it is possible to return to VAT exemption only at the beginning of a given tax year.

Who will not be able to take advantage of the VAT exemption in 2014?

Art. 113 sec. 13 of the VAT Act specifies a group of taxpayers who will not be able to take advantage of the VAT exemption. The legislator may not allow this privilege to be exercised by the following group:

1.taxpayers who make 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:

• tobacco products,
• electricity (PKWiU 35.11.10.0),
• passenger cars other than those mentioned in point (a) e, classified by the taxpayer, pursuant to the provisions on income tax, to fixed assets that are subject to depreciation,

c) construction areas,
d) new means of transport,
e) structures, buildings or parts thereof, referred to in article 1. 43 sec. 1 point 10 lit. a and b,

2. taxpayers providing services in the field of:

a) rights,
b) consultancy with the exception of agricultural consultancy related to animal breeding and breeding and plant breeding, as well as consultancy related to the preparation of a plan for the development and modernization of a farm,
c) jewelery

3. taxpayers who are not established in Poland

The new act on tax on goods and services, which will enter into force on 1 January 2014, still requires clarification. It is therefore important to carefully analyze and familiarize yourself with the sales limits for taxpayers who use or decide to use the VAT exemption.