As of 2023, taxable persons may combine to form groups. While this option brings many benefits, it also poses new challenges. One of the difficult areas is how to change the treatment of VAT deduction during group’s transitional periods at the beginning and end of its life.
A VAT group is two or more of persons (who are interrelated financially, economically and organisationally) registered as one taxable person for VAT purposes. In a VAT group, transactions by individual members are treated for VAT purposes as if made by one and the same person (the group). Consequently, transactions between the members are not subject to VAT.
Who applies the deduction
A VAT group brings the benefits of joint accounting for VAT, such as improved liquidity, reduced VAT record keeping burdens and reduced risk of arrears due to incorrect tax treatment. While VAT grouping is a source of various advantages, its mechanism can give rise to a number of questions and concerns due to changed VAT liability.
One of such questions can be how to deduct VAT on transactions made during the transitional periods at the inception or end of a VAT group.
Having set up a VAT group, businesses may continue to receive invoices for transactions made before the group’s start date. A question then appears if the group may deduct the VAT charged in such invoices. Of crucial importance here is the fact that a VAT group assumes the rights and duties of its individual members. Seen in this light, the group’s entitlement to deduct the tax charged to its members before its inception should not be put in any serious doubt. The same conclusion can be drawn from the Finance Ministry’s official tax guidance on VAT groups. For the full article, see Rzeczpospolita.pl .
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