Polish VAT on an invoice from a foreign contractor

Service-Tax

When conducting business activity, taxpayers purchase goods (intra-Community acquisition of goods) throughout the European Union. They must pay special attention to documenting the sale. It happens quite often that our foreign contractors issue an incorrect invoice. So how to proceed with Polish VAT on an invoice from a foreign contractor? Answer in the article!

Intra-Community Acquisition of Goods (WNT)

Pursuant to Art. 5 sec. 1 of the Act of March 11, 2004 on tax on goods and services (Journal of Laws of 2017, item 1221, as amended), hereinafter referred to as the VAT Act, taxation of the above-mentioned tax are subject to:

  • delivery of goods for consideration and provision of services for consideration within the territory of the country;
  • export of goods;
  • import of goods into the territory of the country;
  • intra-Community acquisition of goods for consideration within the territory of the country;
  • intra-Community supply of goods.

Pursuant to Art. 9 sec. 1 of the VAT Act - by intra-Community acquisition of goods referred to in art. 5 sec. 1 point 4, it shall be understood as the acquisition of the right to dispose of the goods as the owner, which, as a result of the delivery, are sent or transported to the territory of a Member State other than the territory of the Member State of commencement of shipment or transport by the person who supplies the goods, the buyer of the goods or on their behalf.

Conditions for recognizing the acquisition of goods as an intra-Community acquisition of goods

Pursuant to Art. 25 sec. 1 and 2 of the VAT Act, the intra-Community acquisition of goods shall be deemed 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. Pursuant to Art. 17 sec. 1 point 3 of the VAT Act, taxpayers also include legal persons, organizational units without legal personality and natural persons making intra-Community acquisitions of goods.

The condition for recognizing a transaction as an intra-Community acquisition of goods (hereinafter WNT) is that the supplier and the buyer are taxpayers and that the delivered goods are transported to Poland from another Member State. In the case of intra-Community acquisition of goods, the act of purchasing goods is subject to VAT. As a rule, intra-Community acquisition of goods is taxable in the country in which the goods are located at the end of their shipment or transport. WNT is subject to tax reverse charge - under the so-called reverse charge - by the buyer, who is a taxpayer due to intra-Community acquisition of goods, i.e. the entity obliged to tax this acquisition in the territory of the country.

How to account for intra-Community acquisitions?

Pursuant to Art. 20 paragraph 1 of the VAT Act in the intra-Community supply of goods, the tax obligation arises when the invoice is issued by the taxpayer, but not later than on the 15th day of the month following the month in which the delivery was made, subject to paragraph 4 and art. 20a.

Pursuant to Art. 20 paragraph 5 of the VAT Act, in the intra-Community acquisition of goods, the tax obligation arises when the invoice is issued by the taxpayer of value added tax, but not later than on the 15th day of the month following the month in which the goods being the subject of the intra-Community acquisition were made, subject to paragraph 8 and 9 and art. 20b. The provision of paragraph 1a shall apply accordingly.

The above provision obliges the taxpayer who settles the tax on intra-Community acquisition to recognize the tax obligation on the 15th day of the month following the month in which the goods being the subject of the intra-Community acquisition were delivered, unless before that date the VAT taxpayer who is the supplier of the intra-Community acquisition purchase of goods, issued an invoice, because then the tax obligation arises at the time of issuing the invoice.

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Thus, the tax obligation for the intra-Community acquisition of goods arises upon the issuance of the invoice by the taxpayer of value added tax, but not later than on the 15th day of the month following the month in which the goods being the subject of the intra-Community acquisition were made.

Pursuant to Art. 86 sec. 10 of the VAT Act, the right to reduce the amount of tax due by the amount of input tax arises in the settlement for the period in which the tax obligation arose in relation to the goods and services purchased or imported by the taxpayer. Pursuant to Art. 86 sec. 10b of the Act, the right to reduce the amount of tax due by the amount of input tax in the cases referred to in paragraph 2 point 1 and point 2 lit. and - arises not earlier than in the settlement for the period in which the taxpayer received an invoice or a customs document.

Thus, in the event of failure to receive the date referred to in paragraph 10b point 2 lit. a, invoices documenting the delivery of goods constituting the intra-Community acquisition of goods by the taxpayer, the taxpayer is obliged to appropriately reduce the amount of the input tax in the settlement for the period in which this period has expired (see Article 86 (10g)).

Polish VAT on an invoice from a foreign contractor

When purchasing goods, we must pay attention to whether the invoice issued is correct despite providing all data to our contractors. In the case of companies with branches throughout Europe, it happens that Polish VAT is included in an invoice from a foreign contractor.

Example 1.

In March, the taxpayer purchased goods from a UK contractor. The transaction met all WNT conditions. The Polish taxpayer told his UK partner that he was an active EU VAT taxpayer. Despite the fulfillment of all the conditions, the UK taxpayer issued an invoice with Polish VAT.

In this case, when receiving an invoice for the goods that are shipped or transported to Poland from another Member State, you should recognize the intra-Community acquisition of goods, in accordance with art. 9 of the VAT Act.

In the interpretation of the Director of the Tax Chamber in Katowice in the interpretation of February 7, 2014, number IBPP4 / 443-547 / 13 / PK, we read:

"The condition for recognizing the transaction as an intra-Community acquisition of goods (hereinafter intra-Community acquisition of goods) is that the supplier and the buyer are taxpayers and that the delivered goods are transported to Poland from another Member State. In the case of intra-Community acquisition of goods, VAT is subject to the acquisition of goods. subject to taxation in the country in which the goods are located at the time of completion of their shipment or transport. WNT is subject to reverse charge settlement - under the so-called reverse charge - by the buyer, who is a taxpayer due to WNT, i.e. the entity obliged to tax this acquisition in the territory country. "

Thus, the inclusion of domestic VAT on the invoice does not exclude the possibility of recognizing the transaction as an intra-Community acquisition of goods. The legislator does not mention such a situation among the negative premises that exclude the possibility of recognizing intra-Community acquisition of goods (Article 10 of the VAT Act). Finally, it should be emphasized that pursuant to Art. 88 sec. 3a of the VAT Act, there is no right to deduct input tax from an invoice that does not document the actual transaction. Thus, when the goods were delivered from another Member State (intra-Community supply transaction) and the invoice from the seller documents a sale subject to the domestic VAT rate (domestic sale), which did not actually take place, the taxpayer is not entitled to deduct the input tax resulting from this invoice.

To sum up, in the analyzed situation it is necessary to recognize the intra-Community acquisition of goods and settle the tax on the general principles provided for this transaction. According to these rules, the taxpayer is entitled to deduct the input tax in the amount of the settled output tax. The tax base in accordance with Art. 30a of the VAT Act will be the gross value shown on the invoice, i.e. including Polish VAT.