Real estate services - how to settle?

Service-Tax

Polish entrepreneurs are more and more willing to expand their contacts with foreign contractors, thanks to which they not only import services or goods, but also start providing services for them. Sometimes they are normal services subject to the general rules, and sometimes real estate services are provided. It is therefore worth considering when certain services qualify as basic services, where the location of the services is important, and when they qualify as real estate services, where the location of the property is important.

Place of service provision - basic rule

An entrepreneur registered as an active VAT taxpayer selling services to a contractor from the European Union or outside the EU is obliged, first of all, to indicate the place of service provision. It is necessary to determine the method of taxing sales with VAT, because in the light of the VAT Act it is the place of taxation of a given activity.

According to the basic rule - Art. 28 sec. 1 and 28c of paragraph 1. 1 of the VAT Act, the place of service provision:

  • in the case of providing them to the taxpayer is the place where the taxpayer who is the recipient of the service has its registered office, subject to paragraph 2-4 and some special provisions;

  • in the case of providing them to non-taxable entities is the place where the service provider has his registered office, subject to paragraph 2 and 3 and some specific provisions.

Therefore, by determining the place of supply of services, one should indicate the country in which the provided service is subject to VAT. The contractor should then recognize the transaction as "service import". Please note that there are exceptions to every rule. Therefore, in addition to the general rules, the regulations should be taken into account specific, namely, inter alia:
- Art. 28c paragraph. 2 - Where the services are supplied from a service provider's fixed place of business different from his place of business, the place of supply of these services is the fixed place of business.
- Art. 28e - Place of supply of real estate services, including services provided by appraisers, real estate brokers, accommodation services in hotels or facilities with a similar function, such as holiday centers or places intended for use as camping, use and use of real estate, and preparation services and coordinating construction work, such as architectural services and construction supervision, is the location of the property.
- Art. 28 g of paragraph 1. 1.- The place of supply of admission services to cultural, artistic, sporting, scientific, educational, entertainment or similar events, such as fairs and exhibitions, and of ancillary services related to admission services to these events, provided to the taxpayer, is the place where these events are actually taking place.
- Art. 28i - The place of provision of restaurant and catering services is the place where the services are actually performed, subject to paragraph 2.

Example 1.

The Polish entrepreneur provided advisory services to a contractor from Germany (who is a value added tax payer). How should he account for it?

The entrepreneur should issue a standard VAT invoice with the so-called the rate "not podl. EU ". Additionally, the invoice should be marked with the reverse charge.

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Provision of real estate services

One of the exceptions to the general rule is the provision of real estate services, as pursuant to Art. 28e of the VAT Act: Place of supply of real estate services, including services provided by appraisers, real estate agents, accommodation services in hotels or similar functions, such as holiday centers or places intended for use as camping, use and use of real estate, and preparation and coordination services construction work, such as the services of architects and construction supervision, is the location of the property.

In this case, it will not matter whether the recipient is a private person or a self-employed person and where the company's seat is located. It is then important where the property on which the service is to be performed is located. Pursuant to Art. 46 § 1 of the Civil Code: Real estates are parts of the land constituting a separate subject of ownership (land), as well as buildings permanently connected with the land or parts of such buildings, if under special provisions they constitute an object of ownership separate from the land.

In addition to determining where the property is located, it is important to determine whether the service provided is actually related to the property. The regulations do not clearly regulate what services can be considered related to real estate, which may raise doubts.

The tax authorities have repeatedly presented their position in relation to real estate services, for example: Director of the Tax Chamber in Katowice in the individual tax ruling of 11 June 2014, no. IBPP4 / 443-125 / 14 / EK. In his opinion, the services performed must be targeted at a specific property, and the results of the service provided will be used (related) directly to the specific property.

Another example is the position of the Director of the Tax Chamber in Warsaw in the individual ruling of October 5, 2016, No.IPPP3 / 4512-491 / 16-2 / KP. He listed the features that a real estate service should contain, namely:

  • the service should relate to a specific property, i.e. one that is identifiable as to its individual location;

  • the subject of the service should be a specific property or the service should be provided on / to a specific property, not any property;

  • this particular property should be inscribed in the essence of the service provided, be its central element, giving the main meaning to the service and determining its content, which should be understood as that the service can be performed only in direct connection with this and not other real estate;

  • changing such a place, consisting in directing the service to a different property, should destroy the essence and sense of the originally provided service.

As you can see, the provision of real estate services depends not only on the location of the property itself, but also on the specificity of the service. Therefore, it should be remembered that when qualifying a service as real estate services, one must take into account the conditions that must be met in order to be considered as such.

Example 2.

A Polish entrepreneur was commissioned by a company in Germany to provide a construction service on a property in the Czech Republic. The entrepreneur classified the service as real estate services, and therefore wonders whether it should tax the service in Germany or the Czech Republic.

The entrepreneur should tax the real estate service in accordance with Art. 28e of the VAT Act in the country where the property is located, i.e. in the Czech Republic.