Polish government proposes extension of reverse charge mechanism until 2026

The Polish government is set to propose a draft amendment to the Act on the Tax on Goods and Services in the third quarter of this year, aiming to extend the reverse charge mechanism for certain sectors until the end of 2026. This extension will cover gas in the gas system, electricity in the electricity system, and services related to the transfer of greenhouse gas emission allowances, according to the Council of Ministers’ legislative and program work list.

The reverse charge mechanism, initially introduced on April 1, 2023, has been in effect for gas, electricity, and emission allowance services since then. These regulations, however, are currently scheduled to expire on February 28, 2025.

The proposed amendments to the Act, originally established on March 11, 2004, seek to prolong the mechanism’s operation until December 31, 2026. This extension aligns with the VAT Directive and aims to preserve the integrity of the tax system while continuing to benefit transactions within the stock exchange.

The reverse charge mechanism, which has been adopted by several European Union Member States, is designed to prevent tax fraud and ensure market stability. Without this extension, the mechanism would lapse after February 2025, potentially increasing the risk of fraud through disappearing taxpayers, raising market participation costs, and diminishing the competitiveness of Polish exchanges compared to those in other EU countries.

The government’s proposed extension reflects a commitment to maintaining a robust tax system and supporting the financial health of market participants.

Source: ISBnews