VAT tax 2014 (part 7) - Delivery of second-hand goods 2013 - 2014

Service-Tax

The amendment to the Act of March 11, 2004 on tax on goods and services, which has been in force since January 2014, introduced radical changes in the matter of second-hand goods. The modification of the regulations influenced the rules of using the exemption for their delivery, which in turn contributed to the elimination of the definition of second-hand goods.

Two definitions of used goods in 2013

Until the end of 2013, the VAT Act contained provisions double defining the concept of second-hand goods. Both definitions, although referring to the same goods, referred to different rules governing their sale.

The first definition of second-hand goods was regulated in Art. 43 sec. 2, which read that: "Second-hand goods (...) shall be understood as movable property the period of use of which by the taxpayer who supplies them was at least six months after acquiring the right to dispose of these goods as the owner". The above regulations referred to Art. 43 sec. 1 point 2, which exempted an entrepreneur who supplies second-hand goods from VAT, if he was not entitled to reduce the amount of tax due by the amount of input tax.

Until the end of 2013, the taxpayer was exempt from VAT in the event of selling the movables used by him for at least six months, where he was not entitled to deduct input tax upon their purchase. Importantly, the period of use had to be counted from the moment the taxpayer purchased the item.

The second definition, much less known, but equally often used in the course of trade, concerns the supply of second-hand goods covered by a special procedure. According to Art. 120 paragraph 1 point 4, second-hand goods should be understood as movable material goods suitable for further use in their current state or after repair. However, this definition does not apply to items such as:

  • works of art (e.g. paintings, collages, sculptures, statues or artistic photographs),

  • collectors' items (e.g. postage or fiscal stamps, postage stamps),

  • antiques that are more than 100 years old,

  • precious metals (e.g. silver, gold, platinum),

  • precious stones (e.g. diamond, emerald, amber, pearl).

As a rule, for a taxpayer supplying goods used for resale - the VAT tax base is the margin. The value of the said margin should be determined as the difference between the amount sold and the amount acquired, less the amount of tax.

What distinguished these two definitions was certainly the fact that the goods were used by the taxpayer. The explanatory note relating to the margin scheme shows that the movable property is not used by the taxable person but is acquired for the purpose of resale. Therefore, these goods did not fully meet the definition set out in Art. 43 sec. 2 of the Act.

Second-hand goods in 2014 and the application of the objective exemption

As mentioned in the introduction, the changes in the field of second-hand goods, which entered into force in January 2014, had such a significant impact on the issue of VAT deduction when selling them that the provisions covering one of the definitions were removed.

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Well, from the new year, it is necessary to adapt to the amended art. 43 sec. 1 point 2, according to which the supply of goods used exclusively for tax-exempt activities is exempt from tax. At the same time, the condition should be met that on account of the purchase, import or manufacture of these goods, the person delivering them was not entitled to reduce the amount of tax due by the amount of input tax.

Due to the above change, the legislator decided to completely remove the definition of second-hand goods contained in Art. 43 sec. 2, which was repealed at the beginning of January 2014.

Thus, the useful life of movable property (including assets introduced into the company's fixed assets) is no longer relevant, as the right to tax exemption on sale will only exist if the items were used for tax-exempt activities. Thus, this significantly limits the circle of entrepreneurs who may take advantage of this privilege to those benefiting from the objective exemption or the exemption related to the sales value. However, the binding condition is that there is no right to deduct input VAT on the purchase of goods.

Margin procedure

As a rule, the VAT margin procedure may be used by a taxpayer who supplies second-hand goods purchased for resale. The application of both the margin procedure and general rules in trade requires the taxpayer to keep additional records for transactions of this type in order to be able to distinguish the amounts of purchase of goods necessary to determine the value of the margin.

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The taxable amount is the value of the margin obtained, which is the difference between the selling price and the purchase price, less the tax amount.

The following elements should be shown on the invoice issued by the taxable person supplying second-hand goods:

  • date of issue;

  • sequential number from one or more series that uniquely identifies the invoice;

  • the first and last names or names of the taxpayer and the buyer of the goods or services and their addresses;

  • the number by which the taxpayer is identified for tax purposes;

  • the number by which the buyer of goods or services is identified for the purposes of tax or value added tax under which he received the goods or services;

  • the date of the delivery or completion of the delivery of goods or the performance of the service or the date of receipt of the payment referred to in art. 106b paragraph. 1 point 4, if such date is specified and differs from the invoice issue date;

  • name (type) of goods or services;

  • measure and quantity (number) of delivered goods or scope of services rendered;

  • total amount due;

  • in the case of the supply of goods or the provision of services, for which the tax obligation arises in accordance with art. 19a paragraph. 5 paragraph 1 or article. 21 sec. 1 - the words "cash method";

  • in the case of invoices referred to in Art. 106d paragraph. 1 - the word "self-billing";

- as well as the words "Margin scheme - second-hand goods".

However, it is worth paying attention to Art. 120 paragraph 10, which limits the scope of goods to those that the taxpayer acquired from:

  • a natural person, legal person or organizational unit without legal personality, not being a taxpayer, referred to in art. 15, or a non-taxable value added tax;

  • taxpayers referred to in article 1. 15, if the supply of these goods was exempt from tax pursuant to art. 43 sec. 1 point 2 (objective exemption) or art. 113 (exemption due to the value of sales not exceeding PLN 150,000);

  • taxpayers, if the supply of these goods was taxed under the margin system;

  • value added tax payers, if the supply of these goods was tax-exempt on the terms corresponding to the regulations contained in art. 43 sec. 1 paragraph 2 or article. 113;

  • taxpayers of value added tax, if the supply of these goods was subject to value added tax on the basis of a margin, and the buyer has documents clearly confirming the purchase of goods on these principles.