Provision of continuous services and proper invoicing
The amendment to the VAT Act, which took place at the beginning of January 2014, influenced not only the moment when the tax obligation in the tax on goods and services arose, but also the issue of invoicing. At the end of December, the regulation of the Minister of Finance on, inter alia, issuing invoices, and a significant part of the provisions on invoicing is now directly included in the VAT Act. Importantly, the transferred regulations also include those regarding the provision of continuous services. See what the provision of continuous services looks like in the applicable regulations.
Provision of continuous services and the VAT Act
Provision of continuous services is very common. So what are they? Similarly to the previous provisions, the amended VAT Act does not precisely define the nature or manner of interpretation of this type of services, but is limited only to the statement “services provided on a continuous basis”. In the context of the lack of a statutory definition, in order to understand this concept, reference should be made to the linguistic interpretation (see box below).
An attempt to define services of a continuous nature was made by the Director of the Tax Chamber in Katowice in the individual interpretation of July 2, 2012 (IBPP4 / 443-159 / 12 / PK), stating: "In the Dictionary of Polish Language edited by J. Szymczak (PWN, Warsaw 1989), this word was defined as >> happening, happening incessantly, continuing constantly, incessantly; incessant, incessant, constantly repeating, constant <> continuing in space, without gaps, gaps << ”.
It follows from the above that sales of a continuous nature are sales that take place continuously, continuously, without interruption, etc. water, electricity supply or rental, lease, storage - which does not mean that other services cannot be provided on a continuous basis.
On the basis of the above-mentioned opinion, it can be concluded that a characteristic feature of continuous services is the constant behavior of the person obliged to perform activities in accordance with the content of the concluded contract. It is important that it happened repeatedly in the period for which it was concluded and that it was not possible to distinguish its individual stages, i.e. to determine at what point a given part will be performed.
Invoice documenting the continuous service
As for the moment of issuing an invoice documenting the sale of continuous services, it is important to determine when the tax obligation should be recognized for them. According to the general rule resulting from Art. 19a paragraph. 1 of the VAT Act, it arises at the time of delivery of goods or performance of a service. In paragraph 3, on the other hand, the legislator included a clarification when services may be considered as provided (see box below).
Art. 19a sec. 3
"A service for which, in connection with its provision, consecutive payment or settlement dates are established, shall be deemed performed at the end of each period to which these payments or settlements refer, until the provision of this service is completed.
A service provided on a continuous basis for a period longer than one year, for which due to its provision in a given year, payment or settlement deadlines do not expire, shall be deemed to have been performed at the end of each tax year, until the provision of this service is completed. "
It follows from the aforementioned provision that when a continuous service is provided in monthly settlement periods, then the tax obligation arises on the last day of each subsequent month. The exception to this rule is the receipt of all or part of the payment of the amount due prior to the performance of the service.
Returning to the issue of invoicing documenting the provision of continuous services, it should be noted that the general principles resulting from Art. 106i of the VAT Act. In such a case, the invoice should be issued no later than on the 15th day of the month following the month in which the service was performed. The same should be done if all or part of the payment is received from the buyer before the service is performed.
The entrepreneur provides IT services of a technical support nature to another company. The agreement concluded between the parties stipulated that the payment would be made in monthly settlement periods. In line with the above considerations, the taxpayer for services provided in January should issue an invoice no later than February 15, because the tax obligation will appear on January 31.
Importantly, the act also provides for a relatively long period of time allowing for the issuance of an invoice - it may take place even 30 days before the service is provided or the payment is received in whole or in part. However, this limitation does not apply to situations where the prepared document contains information about the accounting period it relates to. In this case, the taxpayer may issue an invoice in advance of more than the indicated 30 days.
The entrepreneur has concluded a contract for the provision of marketing services with a production company, in which monthly settlement periods are reserved. The invoices issued each time contain information about the settlement periods to which the payment relates. This means that the taxpayer has the right to issue an invoice for services provided in February, e.g. on January 20 (i.e. exceeding the 30-day period indicated directly in the regulations), because the tax obligation will arise on February 28.
The date of the service is the date of sale
According to the regulations, invoices should include, among others date of issue and date of sale, i.e. delivery or service performance (or receipt of payment), if different from the date of issue of the document. It should be emphasized that if the invoice is issued on a different date than the provision of the service, which was accepted at the end of each month, the last day of the given month (or quarter for quarterly settlements) should be indicated as the date of sale.
Importantly, due to the fact that the regulation of 28 March 2011 on, inter alia, issuing invoices ceased to apply at the end of 2013, taxpayers lost the option to show only the month and year of sale on invoices documenting the provision of continuous services. Further issuing of invoices in this way may be questioned by the tax authorities, as the current provisions of the VAT Act do not provide for such a possibility.