7 CHANGES IN VAT: The new matrix of VAT rates

Enacting from July 1, the so-called new matrix of VAT rates means a completely new wording of Annexes 3 and 10 to the VAT Act, in which goods and services subject to reduced VAT rates (8% and 5%, respectively) have been indicated. The change consists in a complete departure from the application of the hitherto prevailing “PKWiU 2008” goods classification for the purposes of the reduced rate, in favor of:

• CN (EU “Combined Nomenclature”) – for goods,
• PKWiU 2015 – for services

Until the end of 2020, the PKWiU 2008 classification will be maintained only for the purposes of the obligatory split payment (Annex 15 to the VAT Act)

In addition, from July 1, the new institution – Binding Rate Information (WIS) – will become protective for taxpayers. The regulations on the WIS entered into force on November 1, 2019, however, until June 30, the resulting protection could not be effectively applied. WIS is an administrative decision bindingly confirming the correctness of VAT rates applied, also in relation to comprehensive services.

The new matrix of VAT rates is intended to result in easier classification of goods and services for the purpose of determining their correct VAT rate. When changing the classification method, VAT rates may change – intended or unintended by the legislature.

The rate changes intentionally introduced by the legislator mainly concern the food industry and include, for example:

• tropical and citrus fruits, some edible nuts – from 8% to 5%,,
• all types of bread, including cookies – 5% (heretofore three rates has been used: 5%, 8% and 23% depending on the best before date),
• soups, broths, homogenised and dietetic foods – including dietary foods for special medical purposes – from 8% to 5%,
• mustard, some processed spices – from 23% to 5%,
• some unprocessed spices – from 5% to 8%,,
• lobsters, octopus and other crustaceans, molluscs and aquatic invertebrates (including crabs, crawfish, shrimps, oysters, mussels, snails) – from 5% to 23%,
• ice – used for food and other refrigeration purposes – from 8% to 23%.

Some changes in the scope of VAT rates have already been introduced from November 1, 2019 in the publishing industry, e.g. a 5% VAT rate for electronic publications.

As part of the preparation for the new matrix of VAT rates, taxpayers selling goods / services subject to reduced rates should review of particular goods and services comprehensively and “reclassify” them into appropriate groups according to new symbols (CN and PKWiU 2015). In addition, they must introduce significant changes to their accounting systems – new CN / PKWiU 2015 numbers, and assign new VAT rates to them.