UK – Making Tax Digital Stage 2
The 1st of April 2020 saw the coming into force of Stage 2 of the UK’s Making Tax Digital provisions. These include:
- The enforcement of “digital link” requirements in audit trails and
- The end of the “soft touch” environment with respect to penalties for infringements
The application of digital link requirements may be particularly troublesome for some taxpayers, especially those using manually manipulated spreadsheets as part of their VAT return preparation processes. It will be necessary to review processes to make sure they comply with the new regime. More reading on MTD Stage 2 can be found from HMRC here.
Poland – changes coming into force as of 1 April 2020
As of the 1st of April 2020 a number of changes will come into force in Polish VAT, namely:
- Replacement of the currently separately submitted VAT returns (VAT-7 and VAT-7K) and SAF-T files with a combined extended SAF-T file upload called ‘JPK_VAT’ (i.e. JPK_7M’ for monthly filing frequency and JPK_V7K’ for the quarterly one). The new SAF-T file not only will combine the information that is currently reportable within the VAT returns and SAF-T files, but it will also include some additional pieces of information, which has never been required to date to be reported to the Polish tax authorities for VAT purposes, i.e. on the sales side it will be necessary to mark certain transactions with a specific code assigned to each category of products, services or types of documents. E.g. certain waste supplies will need to be marked with a code ‘05’, supplies of certain intangible services like consultancy, accountancy will need to be marked with a code ‘12’, distance sales made from Poland will need to be marked with a code ‘SW’, transactions subject to the split payment mechanism will need to be marked with a code ‘MPP’. Each error made on the new combined extended SAF-T file may be subject to a fine of PLN 500 (GBP 100; EUR 115; USD 125). The submission of the new combined SAF-T files from 1 April 2020 will be mandatory only for large companies (those with at least 250 employees or with an annual turnover exceeding EUR 50m). The remaining companies will be obliged to submit these new combined SAF-T files only starting from 1 July 2020.
- New reduced VAT rates matrix – currently the goods and services falling under one of the two reduced VAT rates in Poland (5% and 8%) are identifiable by the Polish Classification of Goods and Services (PKWiU) whereas as of April 2020 the goods, to which a reduced VAT rate can apply will be listed using the Combined Nomenclature (CN) codes. Moreover, the scope of the application of the reduced VAT rates will slightly change, i.e. the aim of the Polish legislator was to simplify and make the application of reduced VAT rates more transparent and user-friendly by: i) covering as much as possible the entire product groups (CN divisions) with one rate; ii) general reduction of rates (‘downward equation’) if it was necessary to change the rate for given products. E.g. the VAT rate for tropical and citrus fruit will decrease from 8% to 5%, VAT rate for some spices like mustard or ground pepper will decrease from 23% to 8%, VAT rate for some hygiene products or products for babies and children like food, dummies, nappies, car seats will decrease from 8% to 5%. To balance out the effect of the reduced VAT rates simplification, on few selected goods the tax rate will increase (e.g. lobsters, octopus, crabs, shrimps as well as dishes which include these products will be subject to 23% standard VAT rate instead of the current 5/8% rate).
- ‘Binding Rate Information’ (in PL ‘WIS’ – Wiążąca Informacja Stawkowa) –separately to the already existing institution of a ‘binding ruling’ (in PL ‘Indywidualna Interpretacja’) a new institution of a ‘binding rate information’ will be introduced. Currently, in order for a taxpayer to receive a binding ruling on the applicability of a reduced VAT rate to its products, the applicant of the ruling has to inform the tax authorities of the relevant Polish Classification of Goods and Services (PKWiU) code applicable to its products and the Polish tax authorities are not competent to interpret within the ruling whether or not the provided PKWiU code is correct (and the opinion issued by the Statistical Office was not binding as such). The new ‘Binding Rate Information’ will be an administrative decision, in which, on the basis of the taxpayer’s description of the supply/ingredients of the product etc., the tax authorities will confirm i) the CN (for goods), Polish Classification of the Building Objects (PKOB) or PKWiU (for services) code and ii) the relevant VAT rate applicable to the goods or services. Moreover, the ‘Binding Rate Information’ will be published by the National Tax Information in the Public Information Bulletin under the following link and it will be binding not only the person, to whom it was issued, but also other persons supplying identical goods or services:
- Accounting for import VAT in VAT returns – taxpayers accounting for import VAT under the simplified provisions within the VAT returns will no longer be required to provide the tax authorities with the evidence of the import VAT having been accounted for in the VAT return.
With effect from 1 February 2020 the VAT split payment mechanism in Romania was abolished. It used to be applicable on a mandatory basis to insolvent or VAT indebted suppliers however, following the EU Commission’s warning that the measure was incompatible with the EU VAT Directive as it was disproportionate to the aims which it wanted to achieve, this mechanism was withdrawn by the Romanian government.
A wide ranging review of New Zealand GST is underway. The authorities have sought public comments on changes to the zero rating of land, the treatment of cryptocurrencies, the treatment of fund management services, new invoicing rules and treatment of second hand goods. The consultation document can be found here https://taxpolicy.ird.govt.nz/sites/default/files/2020-ip-gst-issues.pdf