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Good accounting practices

Knowledge is everything. Knowing the principles of VAT settlement in other countries, both in the EU, and outside, provides more opportunities for planning your budget and finding the right market. Proficiency in foreign languages is also important, as without it accountants whose task is handling VAT registration abroad will not be able to read financial statements correctly or communicate with foreign tax authorities or clients. Understanding VAT regulations in each country is also crucial, as each state has their own methods of tax settlement on goods and services.

All there is to know about e-commerce

Modern day accountants know the kind of opportunities business who conduct online sales or provide services online have. However, the e-commerce sector, just like any other business, is subject to tax, which means that certain tax settlement requirements must be met.

Accountants providing services for such businesses must be conscious of the ins-and-outs of legal acts. It is also a good practice to acquaint oneself with e.g. VAT rates for international transactions, VAT OSS tax settlement process, as well as other complicated processes which make up international trade, including VAT settlement processes in various countries.

Stay up-to-date!

E-commerce accounting is not an easy task which is why we offer experienced support which is detailed, effective, reliable, and transparent. It also covers a consistent implementation of good practices in company’s everyday activities. If you are interested in our offer – do not hesitate to contact us!

Changes in EU VAT regulations for non-EU countries

The fact that the UK was no longer subject to the rules of intra-community trade raised a lot of questions. How has the situation of businesses with registered offices in Northern Ireland changed? What is the NI – EU trade relation like now? As it turns out, regulations concerning Northern Ireland and are being introduced at a different rate.

As of January 1, 2021 regulations regarding VAT for e-commerce traders have changed. The most considerable modifications concern not only Great Britain but also Northern Ireland. However, Northern Ireland is subject to a unique set of regulations in this regard. According to a dedicated protocol, Northern Ireland is partially subject to EU VAT regulations and partially treated the same way as Great Britain is – as a non-EU country. The main difference lies in the type of exchange conducted: the former has to do with selling goods, whereas the latter with providing services.

Entrepreneurs who sell their goods comply with the intra-community supply and acquisition transactions rules, as well as distance sales rules which are applicable in the EU. However, those who provide or receive services will have to settle VAT according to the same rules as businesses from outside the EU. These rules will apply for the next 4 years. The protocol offers a time extension for these rules, which means that these methods of VAT settlement may become the default VAT settlement method.

Changes in transactions in Northern Ireland

As of 2021 the VAT settlement method for goods sold in Northern Ireland changed. Settling VAT is much less complicated than it was anticipated prior to the introduction of the simplified VAT OSS scheme for e-commerce for EU member countries. The changes also include a new invoicing procedure.
Currently invoices for goods sold in or via Northern Ireland are indicated with the XI prefix, instead of the GB prefix, as previously. The GB prefix will however remain on the invoices for provided services. This modification aimed at a more efficient VAT declarations management of tax payers registered in Northern Ireland. What is crucial for the sellers, is to differentiate between import and export.

A VAT number for Northern Ireland generated in OSS should also be included in an invoice for control purposes (it’s important to remember that it is a different number than tax identification number). It is possible to use both numbers for verification purposes but it must be indicated on the invoice what type of goods are subject to OSS, and what type of goods are settled in a standard Irish VAT declaration.

Adding new “XI” country codes for particular tax payers is crucial in maintaining order in trade between EU member states and non-EU countries. It will also take the administrative workload off clerks and entrepreneurs, and shorten the entire procedure.

In case of any questions or doubts regarding current VAT settlement methods for companies operating in Northern Ireland, it is worth seeking support of a tax advisor who always remains up-to-date with changes in taxation in EU.

Supporting entrepreneurs focused on development and progress

On 1st January 2022 various changes in tax law will be introduced in accordance with the Polish Deal initiative. The benefits of the relief will be particularly obtained by companies who plan on investing in industrial robots. The automation of manufacturing and processing is an expensive investment which is why the government provided support for entrepreneurs in a form of tax relief programme. The relief for robotization allows for a 50% deduction of costs of purchasing innovative industrial systems.

All companies focused on development and restructuring of the current manufacturing and processing methods will benefit from the new initiative. Introducing new systems will become more accessible even for smaller companies which could not invest in industrial robots in the past due to high purchase costs.

Additionally, the new programme supports other tax solutions such as the Research and Development tax relief (R&D). This relief allows for deduction of costs connected to the conducted research and developing activities. According to the new regulations the amount of cost deduction may be up to 200%.

Automation – a tax relief for ambitious change-seeking entrepreneurs

Both solutions offered as part of the Polish Deal are supposed to not only be financially beneficial but also open doors for automation of the manufacturing industry. A chance to buy more industrial robots should provide support also for businesses who lack employees with specialised knowledge. Some of the tasks can or even should be automated – and this is one of the reasons why the relief was introduced.

Financial assistance in the face of a crisis

The main aim of the Polish Deal is to help eradicate problems connected with the COVID-19 crisis. It mostly focuses on changes in tax law, which are beneficial both for entrepreneurs, as well as ordinary households. The assistance includes tax reliefs and additional social benefits for families with children.

Who will benefit from the upcoming changes in tax law?

Polish Deal concerns not only entrepreneurs but also families and ordinary citizens coping with the aftermath of the pandemic. The new programme offers the following solutions…

Tax relief for middle class citizens

The Polish Deal includes special tax reliefs for middle class citizens. Both tax paying entrepreneurs, where general principles of taxation apply, and citizens with employment contracts can benefit from the aforementioned reliefs. Such a solution aims at reducing the cost of health insurance contribution for persons with income between 5 701 PLN and 11 141 PLN per month. Middle class citizens will be able to calculate the amount of the relief per year from now on. The employers are obligated to include the relief in tax settlement process as of next January.

0% PIT for 4+ families

Large families are also supported by the Polish Deal. The new changes include a new 0% personal income tax (PIT-0) for income which does not exceed 85 528 PLN. This means that families with four children or more will be exempt from PIT. This solution is aimed at all parents, both those who run a household and those who run their own business. Single parents will also be able to benefit from PIT-0. The upper income limit for persons settling their taxes on the general principles of taxation is 115 528 PLN, whereas for parents who settle taxes jointly 231 056 PLN.

Changes to be enforced on 1st January 2022

The Polish Deal offers more changes to come, some of which will take effect on 1st January 2022. We will write more about them in the next part of the article.

Accounting offices and changes in AML

The amendment to the Act on Counteracting Money Laundering and the Financing of Terrorism means more work for accountants, including even more restrictive financial security measures, more scrupulous supervision of beneficiaries, and more workshops for employees.

The amendment includes inter alia an extension of the list of business entities entered into the Central Register of Beneficial Owners (CRBO). In addition to general and limited partnerships, professional partnerships, European companies, foundations, co-operatives entered into the National Court Register, and European Economic Interest Groupings were added. Furthermore, more frequent verifications of CRBO are now required.

Accounting offices and new AML-related obligations

Consequently, accounting offices face more responsibilities and obligations. Accountants are obligated to assess financial risk connected to possible money laundering or terrorism financing, and implement specific solutions under the Act. This will allow reporting on any infringements become more effective and prevent dishonest activities which could compromise company’s financial security. Accounting offices will need to provide workshops for employees, accurately verify beneficial owners’ identity, and archive all documentation confirming conducted transactions. An inspection of internal procedures in accordance with the amendment will also be necessary.

What are the benefits of payroll outsourcing?

Outsourcing provides entrepreneurs with more than just precise calculation of remuneration. Effective budgeting in relation to hiring new employees, optimization of payroll processes and HR costs are only a few examples of many benefits of payroll outsourcing. Another advantage is flexibility – an outsourced accounting company should be able to adjust their services to a changing market and business. It also prepares detailed employee documentation and is legally liable for its own work. That way, it is the outsourced company which is financially liable for any potential mistakes, and not your enterprise.

Moreover, payroll outsourcing ensures continuity of service which, in turn, results in the reduction of costs made by your enterprise. Specialists provide support in any situation, for instance, when many employees take a sick leave at the same time or when an intensive recruitment process is planned. Under such circumstances, outsourced accounting team takes over payroll processes, and relieves the enterprise from any financial liability or additional costs resulting from maintaining an in-house HR department.

Why us?

Entrepreneurs who think of using payroll outsourcing services can rest assured that all necessary HR processes will be managed accurately and in accordance with existing regulations. We provide our services in a complex, transparent and convenient manner, with timeliness, accuracy and compliance with all legal requirements in mind. Our approach allows your enterprise to economise on costs, organize HR department’s responsibilities better, and optimize all business processes.

Shifting the financial liability, having full control over documentation, accurately prepared reports and declarations, reduction of costs, as well as flexible accounting – these are only a few benefits that stem from payroll outsourcing.

What does e-commerce look like in the UK today?

Entrepreneurs from EU Member States who conduct intra-Community online trade can use a simplified OSS method. But is this option also available to online shops whose owners sell goods form the UK?

OSS offers two options: the EU scheme available to businesses with their registered offices inside the EU and the non-EU scheme available to businesses with their registered offices outside the EU.

The non-EU OSS scheme concerns settling VAT on services provided for EU customers in only one Member State (the country of identification, which is also an EU Member State). There is no need for registering or settling VAT in other Member States where the service is provided (consumer Member States). Additionally, the non-EU OSS scheme enables a simpler VAT settlement method for external entities providing services to VAT payers (consumers) from outside the EU.

What about IOSS?

Until the end of 2020 business transactions between the UK and EU Member States were based on the intra-Community rules of purchase and delivery of goods and services. Since January 1, 2021, they have been replaced by import and export.

British entrepreneurs conducting distance sales to EU citizens must also keep in mind the new e-commerce and EU regulations.

Since July 1, 2021, the exemption from VAT on the import of goods which do not exceed in value 22 EUR has been revoked in all EU countries (in Poland the exemption did not apply to e-commerce). This means that the import of all goods which do not exceed in value 150 EUR will be subject to VAT.

In order to simplify VAT settlement a special procedure – Import One Stop Shop (IOSS) has been established for entrepreneurs conducting distance sales from third countries or territories into the EU.

IOSS is dedicated to businesses from outside the EU who sell their products to clients from EU Member States. In short, IOSS concerns goods imported from third countries or territories where the value of the delivered package does not exceed 150 EUR.

What it means in practice is that businesses from outside the EU who offer distance sales to EU Member States can register both for VAT OSS, and, if all requirements are met, for VAT IOSS in the country where trade is conducted. Hence, it is included in intra-Community trade on the basis of similar but simplified VAT settlement methods.

In case of any questions or queries about regulations concerning VAT settlement by entrepreneurs conducting business in e-commerce it is best to turn to the fiscal office or an experienced tax advisor for support.

IOSS vs. OSS – similarities and differences

The main difference between OSS and IOSS lies in the rules of international trade. OSS is a list of services dedicated to businesses conducting intra-community distance sales who exceeded sales threshold of EUR 10,000 per year. The threshold includes all sales to all EU countries except for the country of incorporation, contrary to previous rules, according to which, each Member State had their own thresholds for e-commerce trade. In other words, businesses now operate as a part of the EU and sell their goods to clients inside the EU. For entrepreneurs conducting business outside the EU, IOSS scheme has been created. According to the current definition, it applies to sales of goods imported from third countries or territories, which do not exceed the net value of EUR 150. This solution is to facilitate entrepreneurs obtaining goods from abroad cheaper for later sales inside the country of incorporation.

The entire IOSS procedure has been standardized and simplified as with OSS. Now, one can register online in one of Member States and submit your tax declaration in a single service point. For VAT OSS, it must be the country of incorporation, whereas for VAT IOSS, the seller chooses the country in which they want to report on their sales to EU consumers.

VAT IOSS or VAT OSS – which one should you choose?

Registering for VAT OSS is entirely voluntary, and it is up to the seller to make this decision. It is worth mentioning that registering for VAT OSS does not interfere with registering for VAT EU, and it does not exclude VAT exemption, as sales settled via VAT OSS are not considered in the sales threshold verification for VAT exemption.

If you run an online shop and wish to use a simpler and more accessible VAT settlement procedure, while conducting B2C (Business-to-Customer) transactions, you should consider registering for a simplified settlement method. This choice depends mainly on the type of goods sold and the country in which e-commerce operations take place. The differences and similarities between OSS and IOSS are clear – all that is left is to choose the right solution for the type of business. It is worth remembering that choosing the aforementioned simplifications is optional, and the alternative remains a standard registration for VAT in Member States where the final sale is made. You can find out more about this here.

The job of a statutory auditor

A person with the power to conduct financial audits for a company is called a statutory auditor or simply an auditor. Their main task is to oversee financial statements prepared by accountants. They are mainly responsible for making internal evaluations which can clearly and precisely determine the transparency of various financial activities conducted by the company. Auditing assesses whether all activities are conducted in accordance with the law.

How to choose a statutory auditor?

A specialist responsible for conducting financial audits must be a trustworthy person. A statutory auditor is bound by confidentiality. Neither company-related information nor company financial documentation may be shared with third parties (there are exceptions to this rule by law, for instance if the information constitutes crucial evidence in a court case).

A statutory auditor must be chosen early enough to be able to prepare for the tasks assigned to them and conduct all necessary analyses without time pressure. A statutory auditor must conduct a preliminary examination in order to plan their work. For this reason, audits should not be put off.

Pricing also matters – it should be relevant to the scope of services provided by the auditor. If the pricing is too low for the amount of work required or if they are willing to spend very little time on the audit – maybe you should reconsider hiring this particular auditor. Remember that you always have the right to ask about the scope of services provided by an auditor, and the basis for price calculation.

You have to make sure that the statutory auditor that you are considering is the right person for the job. Not all statutory auditors are independent and impartial enough to conduct audits accurately and objectively. Knowing your candidate’s previous experience in conducting financial audits should help you make the decision. It’s worth asking them how many audits they have conducted and how well they know their field of expertise. An auditor must be able to estimate not only the specificity of a particular company but also their financial capacity, as well as any possible risks ahead.

The final choice of the statutory auditor must not be left to chance. It would be best if the entire hiring process was overseen by the whole management board of the company, and not just one person. An active participation of the most important people in the company will ensure making the best choice possible. In the end, the audit must be conducted in a professional, accurate and reliable manner.

A statutory auditor – the right person for the job

A good auditor remains impartial and objective at all times. They are competent accounting supervisors, able to correctly read and interpret financial statements, know their field of expertise well, have a wealth of experience, and demonstrate their expertise in economy, taxes, and crisis management. Choosing the right statutory auditor should not be rushed as the overall result of a financial audit and the company’s future will depend on this very decision.