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Registering specific task contracts

The early days of 2021 brought about many changes for entrepreneurs in Poland, including the new obligation to report specific task contracts to ZUS. The main aim of this solution, as stipulated in the Anti-Crisis Shield programme, is providing effective financial aid to companies affected by the economic crisis due to the COVID-19 pandemic. However, it is not the only advantage of the proposed change. From now on, ZUS will be updated on the number of specific task contracts being concluded in Poland. Until now, ZUS depended only on estimated numbers. Registration of specific task contracts will also enable ZUS to supervise social security obligations.

How to provide ZUS with required information

As of this year, entrepreneurs are obliged to report signed specific task contracts to ZUS no later than 7 days after each contract has been concluded. Contracts can be registered electronically via PUE (Platforma Usług Elektronicznych) on ZUS website. In order to register a contract, a RUD form has to be filled in with all necessary information about the contract in question. New rules apply to everyone – those, who already pay contributions to ZUS, and natural persons, who are not yet registered as contribution payers.

Does every specific task contract have to be registered in ZUS?

There are cases in which specific task contracts do not have to be reported to ZUS. If a contract is concluded between an entrepreneur and their employee, there is no obligation to register it. Other exemptions from the rule include declarations made for the employer but contracted with another entity, and contracts concluded with persons conducting their own business activity, in which case the contract must pertain to the service provided within the nature of that business activity.

Changes in trade

This article presents two types of goods sold to customers from the UK – goods located in the UK at the point of sale and goods imported to the UK. Other criteria differentiating between the two (such as value of the imported goods, where and how the goods are sold, and legal entities liable for VAT) will be introduced later in the article. All of the changes described below apply from 1 January 2021.

Import of goods from outside the UK in consignments not exceeding £135 in value

To begin with, let us consider goods sent from overseas and sold to UK customers. If such goods do not exceed £135 in value, VAT should be collected when:

• goods are sent directly to customers without intermediary warehouses (e.g. Amazon), in other words, selling goods via your own website directly to customers in the UK
• goods are purchased via marketplaces such as Amazon and are sent to customers in the UK

The key aspect which determines VAT settlement method is not exceeding £135 in value. Cost calculation methods will be discussed later in this article.

In both cases mentioned above the transaction takes place in the UK, therefore the UK VAT rules must be applied. The two instances differ, however, in determining which party is responsible for VAT settlement.

In the first instance, the party responsible for settling VAT is the seller, in which case, tax rate should be specified at the point of sale. Importing goods to the UK on these terms requires registration as a VAT payer with HMRC.

In the second instance, it is the online marketplace which is responsible for settling VAT.

The situation changes when goods are sold to a business customer. If a customer has a British VAT number, then it is their responsibility to settle VAT. Contrary to non-commercial customers, business customer is issued an invoice (either by the seller or by the online marketplace) which includes information on settling VAT on their own, otherwise known as “reverse charge”.

Transferring obligation to settle VAT onto the customer constitutes one exception when the abovementioned rules do not apply.

Other exceptions include:

• import of excise goods, in which case, either the standard import rules apply or one can choose excise tax settlement on their VAT declaration
• import of goods from Jersey and Guernsey which are subject to Import VAT Accounting Scheme rules

It’s important to notice that all of the instances described above apply only to goods which do not exceed £135 in value – consignments exceeding £135 are subject to standard VAT and customs rules. The maximum value of £135 pertains to the total value of all goods in a consignment, not to the value of particular items. To calculate the total value of goods in accordance with the new VAT rules, take net value of the goods being sold (not the declared value), excluding possible insurance and custom duty. It is important for choosing a proper VAT calculation method.

VAT compliance

There are several aspects that a VAT payer (a seller or an online marketplace) should consider to correctly calculate VAT for goods imported to the UK which do not exceed £135 in value. These aspects include:

• registering as a VAT payer
• estimating the nature of goods being sold in order to calculate the right tax rate
• verifying information for keeping a proper record of goods sold

What about goods located in the UK at the time of sell?

Selling goods located in the UK to UK customers

The £135 limit does not apply to the sale of goods located in the UK to UK customers, as all such goods of any total amount are subject to VAT, regardless which party settles tax. Goods located in the UK are understood as goods located on the territory of the UK at the point of sale. They can be stored in the seller’s warehouse, in a warehouse rented by the seller or in one of the online marketplace warehouse chains, such as Amazon as part of the FBA service. In accordance with the EU VAT regulations, the seller must also be registered as a VAT payer.

Notice: it is the shipping address to which the goods are sent, and not customer’s citizenship, permanent address or billing address, that determines whether the customer is subject to UK VAT rules.

If the seller delivers their goods directly to the customer (either a business customer or an individual customer) without using services of an online marketplace, then they are subject to the standard VAT rates.

What about sellers who do use online marketplaces?

When goods are sold to customers via online marketplace, that online marketplace is subject to VAT under the British tax rules.

These rules do not apply if the buyer provides the online marketplace with their VAT number. In such a case, the buyer is deemed as a business customer, and it is the seller who is subject to VAT. Therefore, previously discussed reverse charge cannot be applied.

In summation, the new changes in trade with the UK present a number of variables which must be considered when settling VAT. This article provided only a general scope of the matter, serving as an introduction to the subject. Unfortunately, the new regulations will probably lead to restructuring of many enterprises. Changes in document circulation, additional data verification methods, as well as monitoring prices require more work and specialized knowledge. In order to avoid errors in tax settlement or accounting it is best to turn to experienced specialists. We offer expertise in international accounting and VAT compliance. The scope of cooperation depends on client’s individual needs and the pricing is agreed upon individually.

Obligatory contributions to ZUS for contracts of mandate

As contracts of mandate fall under the civil law contracts category, additional contributions to ZUS do not apply (only in case of the first contract and a remuneration lower than minimum wage). Employees could then pay contributions to ZUS on their own or decide not to do it at all and not to save up for their retirement. Such a solution is perfect for those who prefer receiving the whole sum of their remuneration now, but it will not satisfy those, who would rather receive a higher pension in the future.

Changes in ZUS contributions planned for 2021

Proposed changes regarding obligatory contributions to ZUS aim at increasing pension benefits for employees who work on a mandate contract basis. According to experts, sealing pension scheme is crucial in providing better pension benefits than the existing ones.

According to new rules, civil law contracts would be subject to ZUS contributions, if:

• an employee works on two or more contracts of mandate basis
• a person was employed by the employer both on a contract of employment and a contract of mandate basis
• a person performs tasks on a mandate contract basis for one employer and works on an employment contract basis for another employer
• a person conducts their own business activity while working on a mandate contract basis

Imposing a comprehensive obligatory contribution to ZUS means changes for both employees and their employers. For employees it will mean lower remuneration, and for employers higher costs of employment. Contributions received by ZUS will be allocated to the future pension scheme.

What will the proposed changes bring?

With new regulations comes a variety of advantages. Firstly, they would allow to minimize such malpractices as postponing of signing employment contracts indefinitely by employers. But most importantly, they would provide employees with both health and pension benefits.

There is also a risk of employers deciding not to suffer the costs of hiring employees on a mandate contract basis. Employees themselves may not be satisfied with a lower remuneration. It may even lead to both groups choosing task specific contracts (not subject to ZUS contributions yet) instead or contributing to informal economy.

Where to find information on the proposed changes for 2021?

Information on obligatory contributions to ZUS for contracts of mandate can be found on official government websites, mainly Ministry of Family and Social Policy website. It is also important to follow the news and remember that new regulations can be introduced in the early 2021. The impact these new changes may have on both employers and employees is being analysed by experts.

New JPK format – what to look out for?

Changes in JPK should not come as a surprise, as they were already announced in 2019. Submitting one form with monthly (JPK_V7M) or quarterly (JPK_V7K) declarations in an electronic format is much more convenient for many reasons. However, quarterly declarations still require settling transactional VAT records on a monthly basis. There are also more details to revise.

JPK facilitates the process of settling VAT and speed up the process of data verification of a given document. JPK format includes not only VAT declarations (purchase and sales records) but also JPK_WB (bank statements), JPK_PKPIR (revenue and expense tax ledger), JPK_EWP (revenue registry) and JPK_KR (accounting ledgers). It enables a detailed verification of information on a given enterprise.

GTU codes – a significant change for some entrepreneurs

Changes in JPK also include providing mandatory GTU codes for sensitive goods and services. There are 13 GTU groups assigned to goods or services subject to increased tax control. These items include goods such as alcoholic beverages, tobacco products, secondary raw materials, electronic devices, vehicles and car parts, fuels and diesel oils, precious and non-precious metals, medications and medical devices, and building materials.

Services which require GTU codes include transport services and warehouse management, services regarding greenhouse gas emission, and the so-called intangible services. Intangible services include such fields as accounting, legal, marketing, advertising, consulting, training and research.

How to structure JPK?

JPK format must be kept in accordance with Ministry of Finance’s recommendations. Tools necessary for generating and correctly filling the JPK form are made available by Ministry of Finance, along with a brochure outlining any new regulations, which one should become familiarized with before submitting the form. All tools on government websites are kept up to date and are compliant with new regulations. There are, of course, other methods of generating JPK forms, such as using a paid JPK form version provided by GOFIN. The paid version of GOFIN format includes access to VAT declarations and transactional VAT records submitted in the JPK, as well as support in the electronic filing process.

Why limited partnerships will have been taxed under corporate income tax?

According to the Ministry of Finance, such a solution is crucial, as current regulations regarding limited partnerships exhibit inaccuracies. Audits conducted by the Ministry have indicated that those who decide on forming a limited partnership subsequently avoid paying taxes. This, in turn, leads to reducing the competitiveness of companies and lower revenue of the Treasury. However, a stricter control of limited partnerships is not the only benefit of the new law legislators foresee. The new regulation will also include a maximum abolition tax relief deduction amount, as well as the increase of a revenue limit for current fiscal year enabling entrepreneurs to benefit from a reduced corporate income tax rate.

The opponents of the proposed solution point out that avoiding taxation is a rare reason for choosing a limited partnership. They also call for attention to the high risk of bankruptcy and going out of business for those who will have to adjust to the new regulations and pay corporate income tax. At the same time, they argue that the time to familiarize oneself with the new regulations is too short to properly prepare oneself for the changes to come, even if the law should take effect in May 2021. Moreover, the timing of the announcement of the amendment didn’t go unnoticed, as many businesses are and for the next several months will be struggling financially due to the current economic situation caused by the pandemic.

The changes to come

The new regulation involves changes in legislation regarding:

• Personal Income Tax Act
• Corporate Income Tax Act
• Act on the Lump-sum Income Tax on Certain Revenue Earned by Individuals

In accordance with the announcement, entrepreneurs running limited partnerships are going to have to pay income tax in the amount of 19% beginning with May 2021. The proposed changes also include raising the revenue limit for the current fiscal year which allows a lower CIT in the amount of 9% to 2 million EUR. Similarly, the flat rate limit would also be raised to 2 million EUR.

Another change encouraging running business in Poland is the introduction of 1,360 PLN limit on the tax abolition relief. According to the analysis of the Ministry of Finance, current tax abolition relief is not satisfactory enough for the entrepreneurs to conduct profitable business activity in Poland.

For entrepreneurs whose revenue for the previous fiscal year did not exceed 50 million EUR, and for tax capital groups despite their revenue, the proposed changes would mean the obligation to declare their tax accounting method. All of these changes remain a subject of debate with entrepreneurs.

Many businesses were forced not only to slow down their activity, but even to abandon their original business plans. As a result, it put a strain on overall financial liquidity and effective budgeting. Many projects were postponed indefinitely, some were carried out only partially, and the majority of them were suspended or completely terminated.

The unfavorable situation of Polish entrepreneurs is further exacerbated by the unpredictability of the pandemic and its consequences in the future. In such uncertain times, maintaining financial liquidity is crucial. But how to do it? Even during an economic crisis like this one, it is possible to budget and plan possible investments effectively. All one needs, is to know their options.

How to manage your finances during a pandemic?

An economic slowdown may result in negative consequences in the future which entrepreneurs should already think of, as the resolution will not come with the vaccines or the decrease in numbers of the infected. The repercussions of the COVID-19 outbreak will be noticeable long after the WHO announces the end of the pandemic. A question arises, then – how to protect oneself from losing control over one’s business? It is obviously impossible to go back to the situation from February last year. It will also be challenging to regain financial liquidity at a satisfactory level. However, market analysts recommend some solutions to this problem.

How to obtain additional funding?

The first decision that entrepreneurs should make is to try to gain funding for their investments. Applying for either the Anti-Crisis Shield programme or reaching a credit limit may bring noticeable yet short term benefits for businesses. Replenishing the budget or paying outstanding remuneration are not the only challenges faced by entrepreneurs due to the pandemic. In order to maintain financial liquidity and plan new investments new and more advanced approach must be taken.

Businesses wishing to stay in the market should adopt new methods of crediting. These would require renegotiating terms of their loans with banks which also struggle with the current crisis. In order to obtain new funds on favourable terms, it is necessary to put forward one’s needs clearly, and be able to compromise. Another good idea would be choosing a lease over a purchase. Leasing all business necessities has been a preferred method for smaller businesses, and it is likely to be a far better solution even in the future.

The highest value of saving up

There are plenty of methods of saving up. Business owners who are not afraid of cutting costs, and those looking for new ways to save up, should revise their business plans in the context of such unpredictable variables as a pandemic. The key aspects to reconsider will be planning, more scrupulous monitoring of expenses on a weekly rather than monthly basis, as well as setting priorities. It will enable entrepreneurs to have a better control over the cashflow and predict their future expenses easier. New sources of additional funds can also be found through cost reduction wherever it is possible (e.g. vendors or marketing), or through suspension of any investments for a couple of months.

Will Brexit affect e-commerce?

It comes with no surprise that the e-commerce industry is concerned about Brexit and its consequences. There are many doubts about how to maintain trade using Amazon services after UK is no longer a part of the EU. This issue involves not only sellers of goods in the UK but also those who send goods to the UK from overseas.

Changes to be made by the end of 2020

The UK has not left the EU abruptly – were that to happen, the world economy would have crumbled. That is why, the existing arrangement includes a transition period which will last until the end of 2020. By that time, Britain should secure their deals not only with the European countries but also with the rest of the partner countries. Until then, all transactions via Amazon will be conducted as usually. UK has time until the end of year to reach an agreement with the EU and ensure that international trade remains uncompromised.

Amazon and Brexit – what to prepare for?

Traders should prepare themselves for huge changes after January 1st, 2021. If UK does not reach an agreement with the EU by that time, complications may arise. Were that to happen, it would become challenging to decide how to settle VAT and whether to impose custom duty on goods imported to the UK. Sellers using Amazon should also take into consideration that Brexit may discontinue FBA inventory transfers between the UK and the EU. What it means is that UK stock warehouses will no longer be used to fulfil orders in Europe. However, such inventory transfers will still operate in Germany, Spain, Italy and France. From 2021, UK and the EU will become separate entities. Moreover, sellers should acquaint themselves with the new rules regarding customs duty – they might require hiring new staff to manage it.

Traders who sell their goods directly via FBM should also be vigilant in terms of new rules.

What is Intrastat?

Intrastat is a statistical system designed to collect data on the intra-Community trade. It has been used in the EU since 1993, and in Poland since its joining to the EEC. Intrastat collects information on the goods traded between member countries which are not subject to customs duty. In a way, Intrastat resembles customs declarations, as it includes all necessary information regarding the country of origin, destination, value and nature of traded goods. Separate forms for imported and exported goods are filed monthly, generating statistics of transactions between the member countries.

Who is obliged to submit Intrastat declaration?

Not all entrepreneurs trading with other countries of the EU are required to file Intrastat declarations. The declarations are obligatory for legal entities, natural persons and VAT payers trading with other countries of the EU who exceeded the thresholds set by Statistics Poland. Any entrepreneur who exceeded a threshold in the previous year is obliged to submit their Intrastat declaration.

How and when to submit Intrastat declaration?

In Poland, submitted declarations are handled by the Customs Chamber in Szczecin. The declarations are filed via an online form on PUESC website – paper versions are filed only in certain cases. As in case of other types of declarations Polish entrepreneurs are obliged to file, the submission deadline is the 10th day of the month following the conducted intra-Community transaction.

Amazon

One of the platforms which enable business activities on external markets is Amazon. It provides a valuable support with logistics. Entrepreneurs who wish to expand their businesses in this direction should consider working with this American giant in one of the models it offers: FBM or FBA. What are the differences between the two, and what should you consider when choosing between them?

FBM – full control of shipping

Fulfillment By Merchant (FBM) is a model dedicated to sellers who wish to have a full control over the transport of goods. Amazon serves only as a middleman – it does not interfere with the shipment. FBM provides an online platform to plan sales, control logistics, and use other tools which help prepare goods for shipping. In other words, it is the seller who is responsible for the goods. It is a great solution for online sellers, as it enables them to monitor their shipments.

FBA – sales and logistics combined

However, some entrepreneurs conducting business via online selling platforms would rather outsource this process in its entirety. The Fulfillment By Amazon (FBA) model was created exactly for them. The main difference is that the responsibility for the preparation and shipment of goods lies with Amazon, and not the seller. There are many advantages to this solution. First and foremost, it is Amazon who carries the responsibility for the shipped goods. Moreover, the seller does not have to acquire an additional space to store the goods.

Is there a third option?

FBM and FBA are not the only solutions offered by Amazon. Entrepreneurs, specifically in the seasonal sector, can also choose the Seller Fulfilled Prime (SFP) model. In order to be eligible for SFP, a special status which allows entrepreneurs to sell “Prime” goods needs to be obtained. In this case, it is the seller who prepares the shipment (like in FBM), and passes it on to Amazon, at the same time benefiting from the advantages of Amazon Prime.

FBM and FBA accounting

No matter which model you decide to choose, using Amazon for international transactions may result in additional VAT rates applicable in a particular country. eCommerce sellers who think of expanding their businesses should not only choose the right sales model but also tailor their accounting processes to international trade rules. The support of our experts in international accounting may prove to be invaluable in such a case.