Import and export and VAT - Import of services
According to what was written in the previous parts of the cycle, the import of services is understood as the provision of services for the performance of which the taxpayer is the recipient referred to in art. 17 sec. 1 point 4 of the VAT Act, i.e. a legal person, an organizational unit without legal personality or a natural person who is a recipient of services provided by taxpayers who do not have a registered office or a permanent place of business in the territory of Poland. We invite you to read the next part of the cycle on import and export, devoted to what every entrepreneur should know about importing services.
Place of service provision
When importing a service, the most important issue affecting the method of its settlement is the place of its provision. It should be noted here that it depends on whether the recipient is a taxpayer or a non-taxable entity.
As a rule, services provided to taxpayers are taxed at the place where the buyer has his seat of business (Article 28b (1) of the VAT Act). However, this is not a rigid rule, because the regulations contain many exceptions (e.g. in art.28e, art.28f sections 1 and 1a, art.28g section 1, art.28i, art.28j sections 1 and 2) and Art. 28n of the Act).
If the customer has no establishment or a fixed establishment, the place of taxation of the services is deemed to be the place where he has his permanent address or usually resides (Article 28b (3)).
However, in the case of services provided to non-taxable entities, they are taxed at the place where the service provider has his registered office. However, the legislator also provided for a number of exceptions to this general rule (Art.28c (2) and (3) and Art.28d, Art.28e, Art.28f (1), (2) and (3), Art.28g (2) and Art. 28n of the Act).
If the service provider provides services from a fixed place of business located in a place other than his seat of business, then the place of supply of services is his fixed place of business (Article 28c (2)).
However, if the service provider has no registered office or fixed establishment, the place of taxation of the service provided will be the place where he has his permanent address or usually resides (Article 28c (3)).
Who is the domestic customer?
The domestic customer is considered to be the taxpayer in the import of services. Pursuant to the VAT Act, taxpayers are legal persons, entities without legal personality and natural persons who are recipients of services provided by these entities with their registered office or place of residence or stay outside the territory of Poland.
The domestic customer will be subject to VAT on imported services if all the conditions necessary to establish that the services have been imported are met.
To simplify the complicated tax language, if the services are provided by entities with their registered office or permanent place of business outside the territory of the country, and the buyer is a Polish taxpayer, then the taxpayer for the purchase of these services is a Polish entity.
After the amendment to the VAT Act, from April 1, 2013, in accordance with the new wording of Art. 17 sec. 1 point 4 of the Act, taxpayers also include legal persons, organizational units without legal personality and natural persons purchasing services, provided that the following conditions are jointly met:
- the service provider is a taxpayer who has no registered office and no fixed place of business in the territory of the country, and in the case of services to which art. 28e, the taxpayer is not registered in accordance with article 5. 96 sec. 4,
- the service recipient will be:
- in the case of services to which Art. 28B-the taxpayer referred to in art. 15, or a non-taxable legal person referred to in art. 15, registered or obliged to register in accordance with art. 97 sec. 4,
- in other cases - the taxpayer referred to in art. 15, having a registered office or a permanent place of business in the territory of the country or a non-taxable legal person referred to in art. 15, established in the territory of the country and registered or obliged to register in accordance with art. 97 sec. 4.
It should also be noted that a non-taxable legal person is required to settle the tax both when it is registered in accordance with Art. 97 sec. 4 as an EU VAT taxpayer, as well as when such an obligation is imposed on it, but will not be registered.
Determination of the moment when the tax obligation arises
The issue of the emergence of a tax obligation when importing services is similar to the services provided by domestic entities.
The moment when the tax obligation arises in this type of transactions is regulated by Art. 19 paragraph 19 of the VAT Act. As a rule, it arises upon the performance of the service, and if the provision of the service should be confirmed by an invoice - upon its issuance, but not later than on the 7th day from the date of the service.
If the buyer pays an advance prior to the performance of the service, the tax obligation arises upon its payment. The regulations also include some special cases of tax liability, in which it arises on the same terms as in domestic trade (telecommunications services, sanitary services, garbage collection, public transport, rental and lease, etc.).
In the event that in connection with the provision of the above-mentioned services, consecutive payment or settlement dates are established, the tax obligation should be reported at the end of each period to which these settlements or payments relate, until the completion of the provision of these services (Article 19a (1) of the Act).
However, in a situation where these services are provided continuously for a period longer than a year and due to their provision in a given year, the settlement or payment deadlines do not expire, the tax obligation arises at the end of each tax year, until the provision of these services is completed (Art. 19a (2) of the Act).
The tax base
Due to the fact that it is often the buyer who is obliged to tax the service received, it is worth considering what constitutes the tax base. Well, according to Art. 29 sec. 17 of the VAT Act, in the import of services, the taxable amount is the amount that the customer is obliged to pay.
In a situation where the value of the service has been included in the taxable amount for intra-Community acquisition of goods, it increases the customs value of the imported goods - it is not accounted for as an import of services.
Exchange rate when determining the tax due on import of services
As in the case of other transactions with foreign contractors, also in the case of import of services, in order to correctly calculate VAT, the average exchange rate of the last business day preceding the moment of the tax obligation (Article 31a (1) of the Act) should be used.
In the case of import of services, the average NBP exchange rate should be used as appropriate on the last business day preceding the day when the tax obligation arises, or if, in accordance with the provisions of the Act or implementing regulations to the Act, an invoice may be issued before the tax obligation arises, then the average NBP exchange rate on the last business day preceding the date of issuing the invoice (Article 31a (2) of the Act).
Documenting, recording and showing in the declaration of import of services
The service provider should issue a sales invoice, which may differ slightly from the standard documents. Due to the fact that the tax settlement is borne by the recipient of the service, the supplier issues an invoice in the net amount, in accordance with the rules applicable in the country of its seat, in a foreign language and in a foreign currency. The VAT rate used in this case is "eg".
In order to settle the transaction, the recipient of the service may prepare an internal invoice (from 2014, these documents will be liquidated, currently the taxpayer may prepare such documents) to the received purchase invoice. This document is used to settle VAT.
If the purchase invoice is issued in a foreign currency, we first convert the foreign currency into PLN on the internal invoice, in accordance with the principles described above. The calculated amount is the net value of the internal invoice, to which VAT should be added, resulting from the rate appropriate for the given service.
The settlement of the purchase resulting from the import of services should be included in the VAT-7 / VAT-7K declaration.
Import of services and subjective exemption from VAT
Importantly, also entrepreneurs benefiting from VAT exemptions or resigning from registration as VAT taxpayers must settle the tax on goods and services related to import. Unfortunately, they cannot reduce the tax due, and thus the calculated tax must be paid in full to the tax office.
Also, an entrepreneur who is not a VAT payer may issue an internal invoice, in which he adds VAT to the net amount from the invoice from a foreign contractor, in accordance with the rate specified in Polish regulations. However, since he does not submit a VAT-7 or VAT-7K declaration, he must account for the input tax by submitting a dedicated VAT-9M declaration. This declaration must be submitted by the 25th day of the month following the month in which the service was performed.