The system of VAT rates in Poland is complicated causing difficulties in running a business, due to the need for the taxpayer to correctly assign goods or services to the appropriate grouping of the Polish Statistical Classification of Goods and Services (PKWiU). Sometimes even a small detail may impact the level of the VAT rate (e.g. yogurts with grains 8%, regular yogurt 5% VAT).
The Ministry of Finance has published another draft amendment to the VAT Act (of 8 November 2018), which concerns the proposal to change the VAT rates system in Poland . Some changes are expected to take effect from 1 April 2019 (e.g. lower, 5% VAT rate on e-publications) and some from 1 January 2020 (majority).
Main goals of the new matrix of VAT rates
The draft amendment to the VAT Act provides for the introduction of a new VAT rate matrix, assuming a radical simplification of the VAT rate system.
– introduces Combined Nomenclature instead of PKWiU;
– unifies level of VAT rate within the same assortment group (vide the example with yogurts);
– provides taxpayers with tools to officially confirm the level of VAT rate for a given product / service
(so called binding VAT rate information);
– changes VAT rates (up or down) for certain products.
Reduction of VAT rates
The effect of the proposed solution will be a reduction of VAT rates on some goods, e.g.:
- tropical and citrus fruit, some nuts, e.g. pistachios, almonds, coconut (CN 08 section – Fruit and nuts, citrus peel or melon) – currently taxed at 8% VAT rate, after the changes will be covered, like other fruits, 5 % VAT rate, which results from the equal treatment of all fruits and vegetables,
- each type of bread, including biscuits, is proposed to cover a rate of 5% (currently bread and pastry products are subject to three rates of 5%, 8% and 23%), after changes – 5% VAT rate will cover all products from Chapter 19 of the CN – Prepared from cereals, flour, starch or milk; pastry bread (in this section are classified, for example, pasta, cereal, bread and pastry products and mixtures for their production, as well as finished products, such as noodles, pasta and some dumplings, raw and baked pizza),
- soups, broths, homogenized and diet food – including dietary foods for special medical purposes currently taxed at 8% VAT – after the changes will be taxed at 5% VAT – which is the consequence of the inclusion of most categories of basic food products,
- mustard, sweet paprika spice, some processed spices (e.g.: pepper, nutmeg, thyme) – currently taxed at 23% VAT – after the changes, 8% VAT will be taxed, just like the other spices (classified in general CN 09),
- books – of any kind – and therefore printed on disks, tapes and other media, as well as e-books will be taxed with one 5% VAT rate (this change is to take effect from April 1, 2019),
- products for infants and children, i.e. food for infants and young children, teats, diapers and car seats are currently covered by 8% VAT – after changes of 5%,
- hygienic articles (sanitary napkins, hygienic tampons, diapers) – currently taxed at 8% VAT, will be covered by the 5% rate,
- newspapers, journals and magazines – all kinds – printed, on disks, tapes and other media, as well as e-newspapers are proposed to include one – 8% VAT rate, this means a reduction from 23% to 8% for publishing houses of this type not marked with ISSN symbols (which is currently a condition for the application of a reduced rate) – the change will apply from 1 April 2019.
Increase of VAT rates
Due to the fact that the draft amendment provides harmonization of taxation of entire product groups some of the tax rates for certain goods will be increased, e.g.:
- some unprocessed spices (e.g.: nutmeg, mace, cumin, saffron, turmeric) – from 5% to 8% (effect of unification of VAT rates for spices),
- fruit and vegetable juices other than the so-called 100% (which will remain at the rate of 5%) – from 5% to 23% – currently 5% VAT covers fruit, vegetable, fruit and vegetable juices and beverages, in which the mass fraction of fruit, vegetable or fruit and vegetable juice is no less than 20% of the raw material composition (the inclusion of juices other than 100% VAT rate in the amount of 23% will be related to the unification of the rate for most beverages – coffee, tea, bottled water),
- lobsters and octopus and other crustaceans, molluscs and aquatic invertebrates (including crabs, langoustines, shrimps, oysters, mussels, snails) and their products, caviar and caviar substitutes, as well as meals sold in various catering establishments, of which there are these products – from 5% to 23%,
- ice – used for food and other refrigeration purposes – from 8% to 23%,
- specialist magazines – due to the unification of the VAT rate of up to 8% on all newspapers and magazines (including electronic), it is proposed to increase the rate for specialized from 5% to 8%.
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