Formation of VAT groups postponed until 1 January 2023

Formation of VAT groups postponed until 1 January 2023 

Formation of VAT groups postponed until 1 January 2023
The possibility of formation of VAT groups will be postponed by six months. Companies will be able to enjoy this solution from 1 January 2023. What entities can form a VAT group and on what terms?

Due to numerous proposals of expert groups, the Ministry of Finance suggested postponing the date of entry into force of the provisions on VAT groups. The change of date from 1 July 2022 to 1 January 2023 has already been approved by the Sejm and referred for further consultations by the Senate.

VAT groups – joint settlement of VAT

VAT groups will provide the possibility of joint VAT settlement by related entities. The main advantage will be a one collective VAT SAF-T file (JPK_VAT) instead of separate VAT SAF-T files submitted by individual entities. This will mean no need for intra-group invoices and more efficient management of input tax and cash flows.

Another benefit is no obligation to apply the split payment mechanism between entities of the VAT group and no obligation to verify the contractor in the white list of taxpayers.

VAT groups for related entities

VAT group may be formed by entities related by financial, economic and organizational links but, what is important, they do not have to have the status of a Tax Capital Group for CIT purposes. The solution has been introduced as part of the Polish Order.

VAT groups will operate for a period no shorter than 3 years, and may be established by domestic entities and Polish branches of foreign entities regardless of their legal form and size.

The creation of VAT groups should be simple and encourage businesses to apply this new solution. However, the lawmakers provided for one important condition regarding financial links between the entities.

The 50% equity participation criterion was adopted, what means one of the taxpayers forming the VAT group must hold directly over 50% of the share capital or over 50% of the votes in the supervisory, governing or managing bodies, or over 50% of the rights to participate in the profit, of each of the other taxpayers in the VAT group.

As regards the organizational links, the situation is much simpler, because it is about being under common management and organizing activity in agreement. Economic link means that the principal activity of the members of the VAT group is of the same nature.

The amendment to the regulations providing for the creation of VAT groups has already been passed by the Sejm, and the upper house of the Parliament introduced a few minor amendments to the bill and referred the bill to the Administration and Internal Affairs Committee and the Public Finance Committee.

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Agata Nie┼╝ychowska
Agata Nie┼╝ychowska
Tax Director, Partner