Tax explanations on VAT groups

The Ministry of Finance published the ‘Tax explanations on VAT groups of October 11, 2022’, which includes changes and demands reported during public consultations. It is worth getting acquainted with this document, as it contains regulations on the establishment, operation and tax settlements of a VAT group, i.e. several related entities registered as a new VAT taxpayer to operate jointly for the VAT purposes.

Functioning of VAT groups will be possible from January 1, 2023. Although the establishment of a VAT group could have many benefits, mainly because of the non-taxation of transactions between its members, however the complexity and nature of the regulation will cause many practical issues. Many answers to some areas of concern have been included in the final version of the tax explanations on VAT groups, which, compared to the draft version have been supplemented with, inter alia, the following issues:

• additional explanations on intra-group links, including the possibility of their temporary non-compliance during the existence of a VAT group,
• the application of the simplified procedure for the import of goods (postponed accounting) and the rules on the self-Intra-Community movements and Intra-Community own products,
• examples of transactions between a branch of a foreign entity that has entered the VAT group and its headquarters or a branch from another country,
• concluding an agreement for the establishment of a VAT group in an electronic form,
• when deregistration of a group impacts only future settlements of the former VAT group members.

However, it is wort noting that the establishment of a VAT group still requires conducting detailed analysis concerning in particular the selection of entities that meet the conditions for the establishment of a VAT group, the development of procedures for internal settlements with contractors and with the tax authorities, functioning of the group during its transitional period related to its establishment and termination, the deduction of input VAT. Although these issues have been presented, they still raise a number of questions. Therefore, it is necessary to analyze these issues as regards the situation of the specific entities to form a VAT group.

Tax explanations are available on the website of the Ministry of Finance: Tax explanations – link

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