Binding rate information - guarantee of taxpayer protection

Service-Tax

VAT taxpayers have constant problems with determining the correct VAT rate. Many products with a similar composition may be subject to different rates, e.g. due to the place of sale or shelf life. The incorrect assignment of the tax rate to a good or service, in turn, exposes the entrepreneur to tax arrears. In order to change this situation, the legislator, at the taxpayer's request, will determine the appropriate tax rate for him, and this will be done by the binding rate information (WIS).

Binding rate information

The provisions on binding rate information have been included in the Value Added Tax Act (the VAT Act). Pursuant to Art. 42a paragraph. 1 binding rate information (WIS) is a decision issued for the purposes of taxation with tax on the supply of goods, import of goods, intra-Community acquisition of goods or provision of services. The decision is issued by the Director of the National Tax Information. In the information we can find:

  • description of goods or services that are the subject of WIS;
  • classification of the goods by chapter, item, subheading or code of the Combined Nomenclature (CN) or by section, division, group or class of the Polish Classification of Construction Objects or the classification of the service by department, group, class, category, subcategory or position of the Polish Classification of Products and Services necessary for determining the tax rate appropriate for a good or service;
  • the tax rate applicable to the goods or services.

The decision is issued within three months from the date of receipt of the application for it. In the case of WIS, the provisions of Chapter IV of the Tax Ordinance shall apply, with the exception of chapters 17, 18, 19 and 20. Thus, applying for a rate interpretation will allow to eliminate errors that taxpayers have had so far.

Example 1.

The VAT rate for bread depends on its minimum use-by date or use-by date. If it does not exceed 14 days, the rate is 5%. In the event that the shelf life exceeds 14 days, we apply a rate of 8%. Currently, the taxpayer will no longer have to wonder what rate is correct, as he will be able to apply for WIS instead.

Who is submitting the application?

The application may be submitted by:

  • taxpayers with a tax identification number (NIP), including a taxpayer exempt from VAT;
  • taxpayers purchasing goods from a taxpayer who does not have a registered office or a permanent place of business in Poland, obliged to settle the tax and other entities that make or plan to make a domestic supply of goods, import of goods, intra-Community acquisition of goods or provision of services;
  • the contracting authority within the meaning of the Act of 29 January 2004 - Public Procurement Law, to the extent that affects the method of calculating the price in connection with the awarded public procurement.

What can we find in the WIS application?

In the Regulation of the Minister of Finance, Investment and Development of October 29, 2019 on the template of the application for the issuance of binding rate information, the legislator specified the application template. It should contain the following elements:

  • name and surname or name of the applicant;
  • the applicant's address of residence or registered office;
  • tax identification number or other number enabling the applicant to be identified;
  • name, surname and address of the applicant's representative, if appointed, or other persons authorized to contact regarding the application;
  • specification of the subject of the application, including:
    • a detailed description of the goods or services, allowing for their identification in order to classify them in accordance with the Combined Nomenclature (CN), the Polish Classification of Products and Services or the Polish Classification of Construction Objects;

    • indication of the classification according to which the goods or service are to be classified, indication of the provisions of the Act or executive regulations issued on its basis - in the case where the application for WIS contains a request to classify the goods or services for the purposes of applying the provisions of the Act and implementing regulations issued on its basis , other than those relating to the determination of the tax rate.

The taxpayer must also submit a declaration under pain of criminal liability for making false statements with the following content:
Being aware of criminal liability for submitting a false declaration, I declare that on the day of submitting the application, in the scope of the application in question, no tax proceedings, tax inspection or customs and fiscal control are pending and that in this respect the matter has not been resolved in terms of its essence in a decision or ruling tax authority”. The application should be accompanied by a confirmation of payment of the fee for issuing WIS. The application fee is PLN 40.

Does binding rate information protect the taxpayer?

When submitting the application, the entrepreneur not only wants to know what rate to apply, but also wants to be sure that in the event of a wrong decision, he will not suffer negative consequences.

The legislator anticipated the needs of taxpayers and decided that the WIS must protect them. Binding rate information will therefore be binding on the tax authority with regard to the entity for which it was issued - in relation to the goods or service that is its subject (Article 42c (1) of the VAT Act). Thus, taxpayers applying the tax rate specified in the WIS decision do not suffer any negative consequences. However, we must remember that binding rate information will protect us, but only in a situation where the goods or service are identical to the description contained in the application.

Example 2.

In the application, the entrepreneur made an incorrect description of the manufactured goods. As a result, it received a decision that it may apply the preferential 8% rate. In this case, the taxpayer will not obtain any protection because he has deliberately misled the tax authority.

In order to receive protection, we must remember to describe the goods or services in detail and precisely. Importantly, taxpayers will not be prosecuted in cases involving fiscal offenses or tax offenses, and no default interest will be charged, and taxpayers will also be exempt from paying the tax. The WIS decisions will protect taxpayers from April 1, 2020 (the introduction of the new rate matrix has been postponed due to the state of the epidemic).

Can the WIS be changed?

Pursuant to Art. 42 h of paragraph 1. 2-4 of the VAT Act WIS may be changed by the Head of the National Revenue Administration or the Director of the National Revenue Information in the following cases:

  • The head of the National Revenue Administration ex officio changes or revokes the issued WIS, if he finds its irregularity, including as a result of the premises referred to in art. 240 § 1 of the Tax Ordinance;

  • The Director of the National Revenue Information ex officio changes the issued WIS if it is inconsistent with the provisions of law as a result of:

    • the adoption of an amendment to the Combined Nomenclature (CN);
    • the adoption by the European Commission of measures to determine the tariff classification of goods;
    • loss of compliance with the interpretation of the Combined Nomenclature (CN) resulting from:
      • the explanatory notes referred to in Art. 9 sec. 1 lit. a second indent of Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff;
      • judgment of the Court of Justice of the European Union;
      • classification decisions, classification opinions or amendments to the explanatory notes to the Nomenclature of the Harmonized Commodity Description and Coding System adopted by an organization established on the basis of the Convention establishing a Customs Cooperation Council, done in Brussels on 15 December 1950;
      • error of interpretation or incorrect assessment as to the application of a provision of substantive law.

Thus, in many cases the WIS decision may be changed. Start a free 30-day trial period with no strings attached!

Are WIS published?

Binding rate information, together with applications for their issuance, as well as decisions of the Head of the National Revenue Administration to amend or repeal WIS, and decisions of the Director of the National Tax Information to change WIS are published in the Public Information Bulletin of the National Tax Information (Article 42i of the VAT Act). Of course, publication takes place after removing the applicant's identification data and information covered by the trade secret. WIS is placed without undue delay. The published decisions may also protect taxpayers who did not submit the application. This means that compliance with a decision issued for another taxpayer, but relating to a given good or service, may not be harmful to the taxpayer. In this case, however, it is the taxpayer who has to prove that the binding rate information relates to identical goods and services that he sells.

To sum up, binding rate information (WIS) guarantees that the taxpayer will not suffer negative consequences by complying with it. In addition, in some cases, you will be able to benefit from protection on the basis of published decisions. Therefore, it should be considered that the discussed solution is very beneficial for taxpayers.