Sales of goods to the EU and VAT exemption

Service-Tax

Entrepreneurs are entitled to the VAT exemption both due to the fact that the turnover is not exceeded in the amount of PLN 200,000 and due to the type of business activity. There is a belief that in the case of using the subjective exemption from VAT, it is possible to apply the ZW rate in the case of intra-Community supply of goods. Read the article and find out what the sale of goods to the EU looks like and the VAT exemption?

Intra-Community delivery of goods - general rules

Pursuant to Art. 13 sec. 1 of the VAT Act, an intra-Community supply of goods is considered to be the export of goods from a country to the territory of another Member State to a taxpayer operating in a country other than the seller's country.

As a result of exportation, the right to dispose of the goods is transferred as owner. For example, intra-Community supply of goods occurs when goods are sold by a Polish taxpayer to a German taxpayer who is registered for VAT-EU.

The provision of art. 13 sec. 1 of the VAT Act is applied when the taxpayer is:

  1. A taxpayer registered for VAT-EU;

  2. A legal person who is not a VAT payer, but registered to VAT-EU;

  3. A VAT taxpayer or a legal person not registered for VAT, which operate as such in the territory of a Member State other than the seller's country, where the subject of the transaction are excise goods under the excise duty suspension arrangement or the excise movement movement with excise duty paid;

  4. An entity other than the entity listed in points 1 and 2 operating (residing) in an EU country other than Poland, in a situation where the subject of delivery are new means of transport.

Taxpayer exempt from VAT and VAT-EU

One of the conditions for a transaction to be considered intra-Community supply is registration of the seller and the buyer to VAT-EU. As mentioned earlier, in the case of a VAT exemption, it is not necessary to meet this condition.

This fact results from Art. 113 paragraph. 6 of the VAT Act, where we read: “The intra-Community supply of goods occurs if the person making the delivery is a taxpayer referred to in Art. 15, where the sale is not exempt from tax pursuant to art. 113 paragraph. 1 and 9, subject to the provisions of paragraph 2. 7 ", in art. 113 refers to taxpayers exempt from VAT.

In the case of taxpayers exempt from VAT, there is no question of intra-Community supply of goods, and therefore their registration for VAT-EU is also not required.

However, there is nothing to prevent a taxpayer from registering for VAT-EU.

Sales of goods to the EU with VAT exemption and the VAT rate

In the case of taxpayers exempt from VAT, the sale of goods to the countries of the Community should be treated as domestic sales. Therefore, if domestic sales are exempt from VAT, so are Community sales. Please note that the invoice should include the basis for VAT exemption. The exception is the exemption based on the turnover limit, where the basis for the exemption from VAT does not have to be included in the invoice (§ 3 point 3 of the invoice regulation).

The transactions are recorded in a simplified sales register. It should contain all transactions included in the trading limit.

Example 1.

Mr. Janusz is a VAT-exempt taxpayer due to the fact that the turnover limit of PLN 200,000 has not been exceeded. The entrepreneur intends to sell his goods to Germany, is it necessary to register for VAT-EU in such a situation?

Foreign transactions are included in the VAT exemption limit. If the transaction does not exceed the VAT exemption limit, the entrepreneur is not required to register for EU VAT. Transactions should be treated as domestic transactions, remember to enter the contractor's data correctly.

Summary

In the case of sales of goods to EU contractors who benefit from VAT exemption in the country, does not require EU VAT registration, the transaction must be documented in the same way as domestic transactions.

Trade with foreign contractors is an opportunity for an entrepreneur to increase the company's revenues. Exemption from formalities (e.g. VAT-EU registration) for VAT-exempt taxpayers encourages development in this direction. After exceeding the turnover limit, registration for VAT will be required.

More about VAT and VAT-EU registration in the article: VAT and EU VAT registration - everything you need to know!

Being an active VAT payer is not only associated with increasing formal requirements, apart from the need to pay VAT due, entrepreneurs have the option of deducting input VAT - related to purchases.