Tax clarifications on VAT groups

On 11 October 2022, the Ministry of Finance published the eagerly awaited tax explanations on VAT groups. These explanations (the “MF Clarifications”) relate to regulations on the creation and operation of a new type of taxpayer – a VAT group.

The MF Clarifications refer to the regulations that come into force on 1 January 2023 and focus on the conditions for the formation of a VAT group, the settlement rules during the operation of a VAT group and the issues related to the termination of a VAT group. It is worth mentioning that the VAT group regulations were originally intended to take effect from 1 July 2022, but this date was eventually postponed by six months.

The purpose of the MF Clarifications is to present a practical interpretation of the provisions of the VAT Act insofar as they allow joint VAT accounting by several entities within a group.

How can VAT groups settle?

Members of a VAT group settle as if they were a single taxpayer – this means that a VAT group can submit a single JPK_VAT covering all the purchase and sales transactions of the members, and pay tax for all entities forming the group.

Please note that the main purpose of the new regulations is the exclusion from VAT of transactions between group members. As indicated in the MF Clarifications, any taxpayer may become a member of a VAT group, and a VAT group may consist of:

• Polish tax residents, and
• non-residents, if they operate in Poland thorough a Polish branch.

Which entities cannot belong to a VAT group?

A foreign branch of a Polish entity cannot belong to a VAT group, but a Polish branch of a foreign entity may be a member. This leads to a situation in which transactions concluded between the Polish branch of a foreign business and its head office outside Poland will be taxed.

Does the creation of a VAT group constitute a tax scheme? We already know the answer to this question.

Yes, it does. Importantly, the MF Clarifications clarify this disputable issue. The Ministry of Finance has explained that neither the formation of a VAT group nor any activities aimed at its formation lead to the main or one of the main tax benefits that the entity or entities expect to obtain from the formation of a VAT group.

These activities do not meet the conditions of a general identification, a specific identification or another specific identification. They will, therefore, not constitute a tax scheme.

This leads to the conclusion that the activities described above will not constitute a tax scheme. As indicated in the MF Clarifications, an exception is the situation where a beneficiary of a given tax scheme is a VAT group member. In this event, the provisions on reporting tax schemes apply.

The MF Clarifications also include a handful of clarifications regarding fiscal cash registers. As the MF indicates, a VAT group may benefit, on general terms, from both subjective and objective exemptions from the obligation to use fiscal cash registers.