Learning a foreign language through e-learning and VAT taxation

Service-Tax

Learning a foreign language can be difficult and tedious. It's not easy to learn something that you don't have contact with on a daily basis. In the age of the Internet, many people choose modern teaching methods. A very popular method used by both language schools and tutors is to conduct courses using e-learning platforms. A student who wants to use this method receives access to the platform after paying the fee. The customer can learn a foreign language using a computer, telephone or smartphone and access to the Internet, at any time and place.

Activities taxed with value added tax

Pursuant to Art. 5 sec. 1 point 1 of the Act of March 11, 2004 on tax on goods and services (i.e. Journal of Laws of 2017, item 1221), hereinafter referred to as the VAT Act, VAT is subject to the paid supply of goods and paid services in the territory of the country.

According to Art. 7 sec. 1 of the VAT Act, by the delivery of goods referred to in Art. 5 sec. 1 point 1 shall be understood as the transfer of the right to dispose of the goods as the owner.

However, pursuant to Art. 2 point 6 of the VAT Act, goods are understood as things and their parts, as well as all forms of energy.

In turn, according to art. 8 sec. 1 of the VAT Act through the provision of services referred to in Art. 5 sec. 1 point 1 is understood as any service for a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods within the meaning of art. 7.

Thus, learning a foreign language using an e-learning platform is a service in the light of the VAT Act.

Qualification of goods and services under the VAT Act

Pursuant to Art. 5a of the VAT Act, goods or services that are the subject of the activities referred to in art. 5, listed in the classifications issued on the basis of the provisions on official statistics, are identified with the help of these classifications, if for these goods or services the provisions of the Act or the regulations issued on its basis provide statistical symbols. Taking the above regulations into account, in order to determine what tax rate we have to tax a given service, we have to refer to statistical classifications. The legislator excluded some services from VAT taxation. In the VAT Act, the above-mentioned exemptions can be found primarily in Art. 43.

Scope of VAT exemption

The scope and principles of tax exemption for supplies of goods or services are set out in Art. 43 above the VAT Act. Pursuant to Art. 43 sec. 1 point 26 is exempt from tax services provided by:

  • units covered by the education system within the meaning of the provisions on the education system in the field of education and upbringing,

  • universities, research units of the Polish Academy of Sciences and research and development units in the field of higher education

- and the supply of goods and services closely related to these services.

Pursuant to paragraph 1 point 27 above of this article, private teaching services provided by teachers at the pre-school, primary, junior high, post-gymnasium and tertiary levels are exempt from tax.

In accordance with paragraph 1 point 28 of this article, foreign language teaching services and the supply of goods and services closely related to these services, other than those listed in points 26, 27 and 29, are exempt from tax.

In the light of the mouth. 1 point 29 of the quoted article is exempt from tax for vocational training or retraining services other than those mentioned in point 26:

  • conducted in the forms and on the terms provided for in separate regulations or

  • provided by entities that have obtained accreditation within the meaning of the provisions on the education system - only in the scope of services covered by the accreditation, or

  • financed entirely from public funds,

- and the provision of services and the supply of goods closely related to these services.

Thus, if the taxpayer belongs to the group of entities providing services exempt under the above provisions, they may benefit from VAT exemption when conducting language learning.

Does learning a foreign language using an e-platform benefit from a VAT exemption?

If the taxpayer conducting activities in the field of learning foreign languages ​​does not belong to the group of entities providing services exempt from VAT pursuant to art. 43 sec. 1 point 26, 27 and 29 of the VAT Act, it has the right to apply VAT exemptions to these services precisely on the basis of Art. 43 sec. 1 point 28 of the VAT Act.

At this point, it should be noted that the legislator, envisaging the exemption of language teaching services, did not make it dependent on the teaching methods used. Thus, regardless of the way in which the entity learns foreign languages, it may benefit from VAT exemption.

The above position is also confirmed by the tax authorities. In the individual ruling of the Director of the Tax Chamber in Poznań of January 29, 2015, number ILPP2 / 443-1238 / 14-4 / MN, it was stated that:

Based on the above circumstances, it can be concluded that the Applicant does not belong to the group of entities providing services exempt under Art. 43 sec. 1 points 26, 27 and 29 of the Act on tax on goods and services. (...)

Thus, foreign language teaching services provided by the Applicant are not exempt from tax under Art. 43 sec. 1 point 26, point 27 and point 29 of the Act, as they do not meet the conditions referred to in the above-mentioned regulations.

However, for the provision of the foreign language teaching services in question, the Company will be able to apply the exemption specified in Art. 43 sec. 1 point 28 of the Act.

To sum up, the Applicant will be entitled to apply exemption from tax on goods and services to the language training services offered via the e-learning platform, pursuant to art. 43 sec. 1 point 28 of the Act.