SLIM VAT introduced a VAT deduction for accommodation services!

Service-Tax

When running a business, entrepreneurs often travel to other cities, as a result of which they bear the cost of accommodation or provide accommodation for their contractors. Undoubtedly, this expense is related to their activities, but so far the legislator has made it impossible to deduct VAT from such costs. From January 1, 2021, SLIM VAT introduced a VAT deduction for accommodation services! Let's check what conditions must be met to make it possible.

For whom has SLIM VAT introduced a VAT deduction for accommodation services?

Pursuant to Art. 88 sec. 1 point 4 lit. c of the VAT Act, VAT is not deducted in the case of the purchase of accommodation and catering services, with the exception of accommodation services purchased for resale, taxed by the taxpayer pursuant to Art. 8 sec. 2a of the said Act. Art. 8 sec. 2a of the VAT Act:

Where a taxpayer, acting in his own name but for the benefit of a third party, participates in the provision of services, it is assumed that that taxpayer has received and provided the services himself.

This means that when an entrepreneur buys an accommodation service for another entity and charges it with costs under the so-called re-invoicing, may deduct VAT. The condition is that the incurred cost meets the general principle of the right to deduct VAT, and thus be related to the taxable activity of the entrepreneur.

Example 1.

Mr. Łukasz conducts training activities, and therefore travels all over Poland. As part of its activities, it acquires accommodation services in hotels. This expense has an indisputable tax deductible cost and is related to the taxable activity conducted. The purchase of a hotel service is documented each time by a VAT invoice. Does SLIM VAT introduce a deduction from accommodation services in such cases?

No, due to the fact that Mr. Łukasz purchases hotel services for his own benefit, he is not entitled to deduct VAT on such an expense. Therefore, in column 13. KPiR - Other Expenses may include the gross value of the invoice.

Example 2.

Mr. Aleksander concluded an agreement with XYZ, under which he undertook to provide accommodation for employees of XYZ. The costs of the accommodation service will be transferred to the XYZ company on the basis of the issued re-invoice. This means that Mr. Aleksander purchases accommodation services for XYZ employees and then resells them to XYZ. Does Mr. Aleksander have the right to deduct VAT on the purchased accommodation services?

Yes, SLIM VAT introduces a VAT deduction for accommodation services that are re-invoiced. Due to the fact that Mr. Aleksander purchased accommodation services for the purpose of resale and not for his own benefit, he may deduct VAT from the invoice for the accommodation service.

Example 3.

Ms Danuta concluded an agreement with a client under which she conducts training in the city where the buyer is located. Therefore, she had to book an overnight stay at the hotel. Ms Danuta made an agreement with the buyer that the buyer would reimburse her for the hotel service. For this purpose, it increased the price of the service by the value of the costs of the accommodation service. Can Ms Danuta deduct VAT from the invoice for the accommodation service?

No, due to the fact that Ms Danuta purchased the hotel service for her own benefit, despite charging her buyer with the costs, she is not entitled to deduct VAT.

The purchase of a hotel service for the entrepreneur's own benefit excludes the possibility of deducting VAT from the cost invoice. Moreover, in the case of the sale of tourism services documented with VAT invoices, the margin, including the purchase and resale of tourist packages, the entrepreneur is also not entitled to deduct VAT on the purchased hotel services. Pursuant to Art. 119 paragraph. 4 of the VAT Act, taxpayers are not entitled to deduct VAT on goods and services purchased for direct benefit.

Situation

Is it possible to deduct VAT?

Purchase of a hotel service for your own benefit.

Not.

Purchase of a hotel service as part of the provision of tourism services, which are accounted for according to a special margin procedure

No, because the purchase is for a service for the direct benefit of the tourist.

Hotel service purchase under

providing tourism services on general terms - the hotel service is re-invoiced to other taxpayers.

Yes, because the purchase does not apply to a special margin procedure.

Purchase of a hotel service to a third party and re-invoicing of services.

Yes.

The introduced right to deduct VAT on accommodation services is in line with the judgment of the CJEU of May 2, 2019, C-225/18. On its basis, the Ministry of Finance issued an opinion on the right to deduct VAT on accommodation services (before the introduction of the SLIM VAT package), according to which:

„(...) if a taxpayer purchases accommodation or catering services in order to provide tourism services, assuming that their taxation will be governed by general rules, he should be entitled to a deduction of input VAT on the acquisition of such accommodation and catering services. According to the thesis of the CJEU judgment, the exclusion of the right to deduct in the case of a taxpayer providing tourism services, under which he re-invoices accommodation and catering services to other taxpayers, is contrary to the provisions of EU law.”.

Why are there changes to the deduction of VAT on accommodation services?

In the justification to the draft amendment to the VAT Act, which introduced the SLIM VAT provisions, the legislator indicates the need to adapt the provisions to the needs of the market. At the same time, it stipulates that this change applies only to accommodation services and will not be extended to catering services due to the differences in the specificity of these two categories of services.

In addition, the legislator also indicates the reason why the right to deduct VAT does not cover all accommodation services, but only those subject to re-invoicing:

Such an exclusion is justified by the fact that, in general, accommodation and catering services bear the characteristics of benefits purchased for final consumption (for private purposes), as a result, it may be difficult to identify the purpose of purchasing this service at the stage of verifying the right to deduct.”.

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How to book an invoice for a hotel service purchase?

In order to enter an invoice for a hotel service in the wFirma.pl system, go to the tab: EXPENSES »ACCOUNTING» ADD »

  • VAT INVOICE - if there is a right to deduct VAT on the purchased service,
  • INVOICE (EXCLUDING VAT) - if the taxpayer is not entitled to deduct VAT on the purchased service,

and then as the Type of expenditure, select from the list the option OTHER EXPENDITURE RELATED TO BUSINESS ACTIVITY.

If the entrepreneur can deduct VAT on the purchased hotel service, the invoice will be included in the VAT register of purchases in the VAT amount from the invoice and in the net amount in column 13. KPiR - Other expenses.

If the entrepreneur is not entitled to deduct VAT on the purchased hotel service, the invoice will be included in the gross amount in column 13. KPiR - Other expenses.