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Retail sales tax effective from 1 January 2021
The retail sales tax (RST) was officially introduced into the Polish legal system in 2016. However, due to the proceedings before the Court of Justice of the European Union, collection of the tax was suspended until the end of 2020.
The suspension of the tax by the Ministry of Finance has not been extended, which means that the regulations stipulating the collection of the tax are binding as of 1 January 2021.
Below we present the most important information about the retail sales tax:
- Basic information
- What is the retail sales tax and to what does in apply?
- Who will pay the tax?
- How to calculate the tax amount?
- New obligations
Basic information
The Act on the retail sales tax was passed on 6 July 2016. In accordance with the Act, retail sales to consumers are the basis of taxation with the tax (“RST”).
Originally, collection of the tax was to have already started in 2016, however, due to the implemented regulations being challenged by the European Commission (“Commission”), its collection was suspended until 31 December 2020. The Commission found that the RST regulations do not comply with the single market – as they constitute prohibited state aid to smaller enterprises.
This decision was the subject matter of a complaint by Poland to the European Court (“EU Court”). On 16 May 2019 the EU Court issued a judgment in which it indicated that Poland is authorized to introduce the RST. The European Commission appealed against this judgment and currently the matter is being examined by the Court of Justice of the European Union (“CJEU”).
On 15 October 2020, the Advocate-General of the CJEU issued an opinion in the case of the Republic of Poland vs the European Commission (Commission) (case no. T-836/16). According to the position of the Advocate-General, Polish retail sales tax regulations do not violate European Union law.
Despite the lack of a final ruling, the tax has been in force since 1 January 2021. The final ruling of the CJEU can be expected in the first quarter of 2021.
What is the retail sales tax and to what does in apply?
Tax regulations cover retail sales which should be understood as sales within the territory of Poland constituting a part of the seller’s business activities, selling goods to consumers at a price based on a contract concluded on the business premises of the enterprise or outside them (also when the sale is accompanied by the provision of a service that is not recorded separately).
Who will pay the tax?
The taxpayer is the retail seller, who should be understood as an individual, legal person, partnership or organizational entity without legal personality that conduct retail sales to consumers.
The retail sales tax regulations stipulate a list of exclusions/exemptions due to the nature of the sale or the range of goods.
Sales of certain goods are exempt from the tax, such as electricity, water provided to consumers by water and sewerage companies, district heating, natural gas and gas in bottles delivered to consumers, solid fuels (coal, coke), heating oils and diesel oils used for heating purposes, and drugs, special purpose foodstuffs and medicinal products refunded or financed from public funds.
How to calculate the tax amount?
The excess of revenue over PLN 17 million monthly obtained from retail sales – sales that as a rule are recorded using a cash register – is subject to the tax.
The tax is progressive and stipulates two tax rates:
0.8% of the tax base – in the part in which the tax base does not exceed PLN 170 million; and
1.4% of the excess of the tax base over PLN 170 million – in the part in which the tax base exceeds PLN 170 million.
New obligations
Retail sellers are required to submit monthly tax returns to the Tax Offices by the 25th day of the month following each consecutive month.
The first tax return should be filed by 25 February 2021. The rules stipulated in the Tax Code apply to the tax returns submitted and their corrections.
Retailers whose monthly revenue from retail sales does not exceed PLN 17 million will not be required to file “zero” tax returns.
One tax, many problems
To date the Ministry of Finance has not prepared any explanations that would allow an interpretation of the questionable provisions of the Act.
Taxpayers have more and more doubts as to how the tax should be calculated:
How to determine the amount of revenue subject to taxation?
How to determine the moment when the tax duty arises?
Will it be possible to include the tax in tax-deductible expenses?
Should sales documented with a TIN receipt be included in taxable income?
Which sales models are affected by the tax? Which of them will not be taxed?
What should be done in the case of returns of goods?
Will the sales of gift cards be taxable?
These are just some of the questions to which the Ministry of Finance has currently given no clear answer. Moreover, taxpayers are faced with numerous technical challenges in calculating the tax amount.
Challenges related to the tax
The new tax will require that enterprises engage in preparing for the changes and monitoring them, including:
Analysing transactions subject to the tax or exempt from it;
Calculating and reporting retail sales tax.
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