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  • On 1 April 2023, the provisions implementing the reverse VAT charge mechanism for transactions concluded on the exchange market came into force.
  • The provisions are temporary and will be in effect until 28 February 2025. They generally apply to all participants active on the markets operated by the Polish Power Exchange.
  • In connection with the above implementation, the method of calculating payments to IRGiT’s clearing guarantee system was changed.

The reverse charge mechanism, which was implemented in accordance with the provisions of the Act of 9 March 2023 amending the Act on Administrative Enforcement Proceedings and certain other acts, entails a transfer of the VAT settlement obligation to purchasers who are VAT taxpayers. As a result, transactions are settled in net amounts, and the purchasers in transactions report output and input VAT in the same amount, making VAT fully neutral.

How will the new mechanism affect exchange-based trading and the Polish economy as a whole?

“For IRGiT and POLPX members, the main difference will be the lower cost of participation in exchange trading: the financial burden on power companies will decrease by 18.7% as a result of a lower level of financial collateral paid in by market participants. Another important thing is that the financial liquidity of parties in transactions cleared by the Clearing House will improve, and the domestic power and gas market will become more competitive after uniform rules for the operation of domestic and foreign companies on the wholesale markets are adopted. This will immediately increase the attractiveness of the offer of the Polish exchange in comparison with other exchanges using the reverse charge mechanism," says Łukasz Goliszewski, Vice-President of IRGiT’s Management Board.

But these are not the only advantages of the new solution. It will also improve stability and predictability of the tax policy, including the introduction of a mechanism to safeguard the fiscal interests of the State Treasury.

“The implementation of the reverse charge mechanism for exchange-based transactions for electricity, gas and CO2 emission allowances is a response to the demands of market participants and, in our opinion, will significantly contribute to optimizing trade, reducing costs passed on to consumers in the price of goods and improving the competitiveness of the domestic market when compared to other European markets.” adds Piotr Listwoń, Chief Operating Officer and Vice-President at the Polish Power Exchange.

The addition of the reverse VAT charge mechanism for exchange-based trading of CO2 emission allowances is very important as it removes barriers to trading of emission allowances. Until now, they have been covered by the mandatory split payment mechanism, which was virtually impossible to apply due to the nature of the process to settle exchange transactions. The reverse charge mechanism removes these barriers and will certainly contribute to a stronger domestic trading market for emission allowances.