VAT rate updates; domestic reverse charge on power; Excise changes
A new draft law UD125 introduces amendments to various acts, primarily focusing on the Tax on Value Added Tax (VAT Act), the Excise Duty Act, and related legislation. These changes aim to align Polish tax laws with European Union directives, improve compliance, and address current administrative and market concerns.
Read more in our Polish VAT guide. Changes to the VAT Act (Tax on Goods and Services):
1. VAT rate changes
Amendments include adjusting VAT categories to meet the limits set by the EU VAT Directive, which governs which goods and services can benefit from reduced VAT rates.
- A 0% VAT rate for rescue ships and lifeboats used at sea.
- Continued application of the 8% VAT rate for certain medical devices, regardless of whether they were approved under previous or current regulation
- Removal of the reduced VAT rate (8%) for live equines (horses, donkeys, mules), raising it to 23%.
- Application of the standard VAT rate (23%) on hemp products (Cannabis sativa) intended for smoking or inhalation.
- Clarification of VAT treatment for fertilisers, plant protection products, and feed.
- Reduction of VAT on menstrual cups from 23% to 5%, aligning with other feminine hygiene products.
2. Extension of the Reverse Charge Mechanism:
- This mechanism, currently applied to gas, electricity, and greenhouse gas transfer services, helps prevent VAT fraud (disappearing taxpayers) in exchange-based transactions. The law extends this mechanism until December 2026 to maintain market integrity and prevent abuses.
Abolition of the Obligation to Integrate Cash Registers with Payment Terminals: The law removes the requirement for businesses to integrate online cash registers with payment terminals by 2024. Instead, settlement agents (payment processors) will be required to report transaction data directly to the tax authorities. This change addresses market concerns about the availability of integrated payment terminals and is seen as a beneficial solution for businesses.
3. Excise Duty Reforms
- Refund for Exported Passenger Cars: The law allows for the refund of excise duty on passenger cars that were temporarily registered in Poland for export abroad. This change addresses a gap in the current law, aligning it with a recent ruling by the Court of Justice of the European Union.
- Exemption for Research and Development Vehicles: Passenger cars used for research and development activities and registered professionally will be exempt from excise duty. This aims to support innovation and enhance the competitiveness of Poland’s automotive research sector.
Overall, the proposed amendments aim to modernize tax legislation, enhance compliance with EU directives, and reduce the administrative burden on businesses. The changes reflect a broader effort to improve the efficiency of Poland’s tax system while addressing specific industry concerns, such as those in the automotive and medical sectors.
