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As of January 1, 2020, there will be new rules of taxation of chain transactions, documenting of intra-Community supplies and settlement of transactions within the call-off stock.
According to Council Directive 2018/1910 of 4 December 2018 and the respective Implementing Regulation, Member States, including Poland, are obliged to introduce changes in the following areas:
Such generally stated provisions give Member States with relatively large implementation freedom – actual consequences will depend on wording of the introduced domestic provisions. Regardless of the changes introduced, taxpayers should carry out a review of their transactions and consider redefining their tax treatment. This also requires considering the expectations of business partners and legal regimes implemented by the countries where they are located. Freedom of implementation will also result in the need for even greater attention to be paid to the regulations that are in use in other countries with respect to the consistency of treatment of transactions and the principles of their taxation.
Additional obligations will be imposed on taxpayers performing ICSs - among others, the rules concerning documentation confirming the delivery of goods. For example, the vendor will be obliged to possess two items of non-contradictory evidence confirming the dispatch or transport which were issued by two different parties that are independent of each other. Moreover, the vendor will be required, in certain cases, to obtain a written statement from the acquirer confirming that the goods have been dispatched by the 10th day of the month following the month of delivery.
It is important to prepare for new – more restrictive – rules for documenting ICS transactions. Taxpayers should review the existing process of collecting confirmations and examine whether the documents will meet the new requirements. This process, as it will require cooperation with business partners – and possible changes of the arrangements, should start as early as possible and ensure that the acquirer provides a timely statement on the dispatch of the goods from the country.
Currently there are different rules in the Member States for the application of the call-off stock simplification. The changes will unify the applied regulations – from 2020 in each Member State there will be a possibility to apply the simplification for this type of transaction, similar to the mechanism that are currently in use in Poland and – after meeting certain conditions – recognizing the delivery only at the moment of collecting goods from the stock by the purchaser located in the other Member State.
The result of these changes would be the extension of the application of the mechanism to other Member States in which such simplifications have not yet been implemented, and the harmonization of the application of the rules throughout the European Union.
Regardless of the shape of the solutions adopted by the Polish legislator, taxpayers must be ready for the upcoming changes. By the time the amending law comes into force (January 2020), the first step should be to review the existing rules, in particular the way of documenting intra-community transactions and the adopted rules for taxation of chain transactions. This will help to gain the time needed to prepare business to the new regulations and obligations, as well as to establish consistent tax rules with foreign business partners. A review of call-off stock simplifications currently used in different Member States should also be performed, as the changes may challenge the purpose of using such schemes.
As some of the changes result from the Implementing Regulation, which Member States are obliged to apply directly, it is already possible to determine precisely what obligations will await taxpayers from 1 January 2020 (in particular – the new rules of documentation of the ICSs transactions). As per other changes, the analysis of the VAT Directive provisions allows to predict the possible shape of the changes, but a lot will depend on the domestic legislators. Even assuming that the draft of the Polish amending act will be published in the first half of 2019, these changes may be so far-reaching that there may not be much time left for their implementation.