VAT Groups

What will change?

From 1 July 2022, it will be possible to establish a VAT group in Poland. This concept will allow for a joint settlement of VAT by a group of closely related entities. The VAT group may be created by taxpayers established in Poland or foreign entities holding a Polish branch and for a period no shorter than 3 years.

In order to establishment the VAT group, its member will have to sign an agreement and register the group as a separate VAT payer at the tax office. After the registration, all transactions made between the VAT group members will not be subject to VAT.

What does it mean?

The establishment of the VAT Group can generate a number of benefits for its members:

no invoices documenting the supply of goods/provision of services among the group members (and therefore also no correction invoices and no need to determine GTU codes for internal transactions)
only one SAF-T (JPK) will be submitted on behalf of the entire VAT group
no obligation to apply the split payment mechanism for intragroup transactions
risk limitation in case intragroup transactions are subject to reduced VAT rates or VAT exemption
cash flow improvement – if the group includes an entity that usually shows an excess of input VAT to be reimbursed by the tax office, this excess may be credited against the total group VAT liability right away (instead of having to apply for a direct refund of the excess) – see the diagram below:
increasing the amount of input VAT to be deducted – if the group includes an entity which conducts a business activity exempt of VAT, an adequately structured transaction flows in the group can generate remarkable tax savings at the group level due to increased amounts of deductible input VAT.

In particular, the concept of VAT groups should attract attention of the Polish tax capital groups (PGK) and other capital groups:

where a significant number of intragroup transactions takes place
which include entities conducting both taxable and VAT exempt activities – for instance, from the financial sector
which include entities frequently showing input VAT amounts to be reimbursed (for instance, in regard with a considerable number of intra-Community supplies/exports of goods or provision of services subject to taxation outside Poland)

How can we help?

Our support may consist in performing an analysis and recommending optimal solutions with respect to the establishment and ensuring efficient operation of the VAT group. For example, we can determine:

Which entities from the capital group are eligible for participation in the VAT group
Whether participation of a particular entity in the VAT group will not adversely affect the group’s VAT settlements
If the present cash flow structure among the capital group members will not limit the right to deduct input VAT once the VAT group has been established
How to organise internal processes in the capital group in order to guarantee a sufficient level of control over preparation of the single VAT group’s SAF-T (JPK) and the payment of the total group’s VAT liability
Which procedures already existing in the company need to be modified or what new procedures should be introduced in order to properly allocate all the purchases and sales taken up by the VAT group

Additionally, we can prepare a draft of the VAT group VAT group establishment agreement as well as the templates of necessary procedures.

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