VAT tax (part 4) - Determining the place of taxation
VAT, present in virtually every purchase and sale transaction, is one of the greatest pillars of the state budget. Therefore, its correct settlement is extremely important, among others for entrepreneurs, because mistakes in this matter may even have fiscal penal consequences. Therefore, it is worth knowing the necessary rules for taxation. In this article, we will focus on finding out where services are taxed and where goods are taxed.
Place of taxation of services in VAT
The provision of services in the course of trade is understood as any service provided to a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods. In order to correctly determine the place of taxation of services in the context of VAT, it is necessary to take into account the territorial scope to which the suppliers and buyers of services are subject.
Place of taxation of services for domestic sales
The basic principle according to which the place of taxation of services should be determined is Art. 28b of the VAT Act. According to it, in the case of providing services to taxpayers, the place of supply is deemed to be the place where the taxpayer-recipient has his registered office. Art.28c indicates, however, that in the case of the provision of a service to entities that are not taxable persons (i.e. private persons), the place of supply is considered to be the address at which the service provider has his registered office.
However, in the case of domestic sales, the place where the service is supplied is not the same as the place of taxation. In this case, the tax obligation arises on the part of the service provider. He will also be obliged to charge VAT and transfer it to the tax office, providing services to domestic companies or private persons.
Place of taxation of services - import of services
When considering the import of services, art. 28b of the VAT Act. An entrepreneur, regardless of whether he is an active taxpayer or whether he benefits from VAT exemption in his country, is obliged to settle this tax on account of the imported services.
Thus, in the case of import of services, the place of taxation will be the same as the statutory place of supply of services.
Place of taxation of services provided to foreign entities
The taxpayer providing services to foreign entities should also refer to the already indicated provisions of Art. 28b and 28c of the VAT Act. Thus, when providing services in this way, the taxpayer must find out whether the recipients are other companies or private individuals. The place of taxation must then be regarded as the place of supply of the services.
For example - a Polish entrepreneur providing programming services for a taxpayer from Germany will not be obliged to charge VAT. The place of taxation will be the registered office of the purchaser of the services. If, however, services were provided to a German citizen - a private person, then the place of taxation would also be the country of the service provider, i.e. in this case - Poland.
Place of taxation of goods
Delivery of goods means the transfer of the right to dispose of the goods as owner. As in the case of services, in determining the place of taxation of goods, the main factor will be the territorial scope to which the seller and buyer are subject.
Place of taxation of goods for domestic sales
The basic rule is that the place of delivery, and therefore the place where the goods are taxed, will be where the goods are at the time of delivery - for goods neither shipped nor transported. This means, for example, that the place of taxation of goods in the case of stationary sales in a store will be the place of business where the sale takes place.
Where goods are dispatched or transported, the place of their delivery and taxation will be the place where the goods are at the time shipment or transport to the buyer begins. It does not matter whether the goods are moved by the supplier, buyer or third party. Thus, such a situation will occur in the case of mail order sales within the territory of the country and traditional orders related to transport to the customer (e.g. transport of building materials from a warehouse to a construction site).
WNT and WDT and the place of taxation of goods
According to the basic rule indicated by Art. 25 sec. 1 of the VAT Act, intra-Community acquisition of goods (intra-Community acquisition of goods) is considered to be made in the territory of the Member State where the goods are located at the time of completion of their shipment or transport. For example, in a transaction involving active VAT-EU taxpayers from Germany (supplier) and Poland (recipient), the place of taxation of goods will be Poland.
Similarly, in the case of an intra-Community supply of goods (intra-Community supply of goods), the place of taxation of the goods will also be the place where the shipment of the goods ends. For the Polish taxpayer performing ICS, this means that the place of taxation is with the recipient, the value added tax payer.
Place of taxation of goods on import and export of goods
If the place of commencement of shipment or transport of goods is the territory of a third country (non-EU), the delivery of goods by the taxpayer is deemed to have been made in the territory of the Member State from which the importation takes place. In this case, the authority responsible for collecting VAT is the customs office of importation. For example, if a Polish taxpayer buys goods from China, the place of taxation of the goods will be Poland.
If the goods are placed, at the time of their entry into the territory of the European Union, one of the following customs procedures or destinations:
- inward processing procedure in the suspension system,
- the temporary admission procedure with total relief from import duties,
- the customs warehousing procedure,
- transit procedure, including temporary storage, prior to dispatching a customs-approved treatment or use,
- intended use - entering goods into a free zone or free warehouse
- the place of importation of such goods is the territory of the Member State where the goods will cease to be subject to these procedures and destinations.
Similarly, in the case of exports of goods to third countries, e.g. from Poland to Russia, the place of taxation will be the country of destination, i.e. in this case Russia.
In addition, it should be remembered that the place of taxation of the goods will only be a third country, provided that you have a document of exportation of the goods. It can be a SAD customs document or an electronic confirmation IE-599. In the absence of appropriate export documentation, the transaction should be treated as domestic and - thus - additionally taxed at the appropriate VAT rate.
Special rules for determining the place of taxation
There are a number of exceptions to the above-mentioned rules for determining the place of taxation. All of them are indicated in the VAT Act. The most popular are:
- real estate services, including services provided by appraisers, real estate agents, accommodation services in hotels or similar facilities (e.g. holiday centers, campsites) where the place of performance is the property's location;
- passenger transport services, where the place of performance is that where the transport takes place, including the distances traveled;
- admission services to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions where the venue is the venue where those events take place;
- restaurant and catering services - the place of performance is the place where the services are performed. The exceptions are services performed on board ships, aircraft or trains during the part of passenger transport performed within the territory of the European Union where the place of provision of services is the place where the transport of passengers begins.