Intra-Community supply of services of a taxpayer exempt from VAT

Service-Tax

An entrepreneur who benefits from VAT exemption and cooperates with companies from the territory of the EU, may be required to submit additional VAT declarations. See how to settle the intra-Community provision of services by a VAT-exempt taxpayer!

Who can benefit from the VAT exemption?

To begin with, let us remind you who can benefit from the exemption from tax on goods and services. Pursuant to Art. 113 paragraph. 1 of the VAT Act, sales made by taxpayers whose sales value did not exceed the total of PLN 200,000 in the previous tax year are exempt from tax. If this limit is exceeded during the current year, the exemption automatically ceases to apply as from the activity in which this amount was exceeded.

In the case of entrepreneurs starting business activity, the limit of PLN 200,000 is calculated proportionally to the period of business activity conducted in a given year.

When is it not possible to benefit from the VAT exemption?

The VAT Act also lists exceptions for which it is not possible to benefit from the VAT exemption. These include:

  • supplies of goods subject to excise duty (with the exception of, inter alia, tobacco products and cars other than new means of transport),

  • delivery of construction sites,

  • delivery of new means of transport,

  • providing legal and advisory services,

  • providing jewelery services.

Intra-Community supply of services by a VAT-exempt taxpayer

Entrepreneurs benefiting from VAT exemptions are entitled to sell to foreign contractors. In the case of the export of goods or the provision of services to companies from outside the EU, the entrepreneurs are not burdened with additional obligations. If, on the other hand, the buyer is a company from the European Union, then most often the service will require registration for intra-community transactions.

VAT returns submitted by non-VAT

Intra-Community supply of services by a VAT-exempt taxpayer is possible, but it has certain consequences. In the event that services falling under Art. 28b of the VAT Act, as already mentioned, it will be necessary to register for VAT-EU. Art. 28b of the VAT Act indicates that when providing services to the taxpayer (ie the company), the place of taxation is the seat or place of business of the buyer. The exceptions not covered by the above article are, inter alia, real estate services. Registration for VAT-EU will be necessary, for example, when providing IT services to a company from another European Union country that is a VAT-EU registered taxpayer (this can be verified using the VIES database).

Registration is made on the VAT-R form in part C.3 of the form. When selling or purchasing services, check box 60 and indicate the expected date of commencement of these activities. The notification must be made before the first transaction.

The entrepreneur who performs the service as part of the intra-Community service will be required to submit VAT-EU summary information, in which the buyer's VAT-EU number and the transaction amount converted into PLN must be shown.

Intra-community service provision - by when to submit EU information?

VAT-EU information may be submitted for monthly periods only in electronic form - the deadline for submission expires on the 25th day of the month after the given billing month.

Importantly, VAT-EU information is mandatory only when intra-Community transactions have occurred in a given period. There is no need to submit "zero" information when the entrepreneur did not provide services to EU taxpayers in a given period.

Usually, when providing IT or programming services, there are also purchases of services from EU companies, e.g. from Google AdWords or the purchase of access to programs. The received invoice will not include VAT, but the entrepreneur, despite being exempt from VAT, will be required to calculate and pay the tax (usually the basic rate of 23% applies).

An entrepreneur who benefits from VAT exemption for the intra-community provision of services (e.g. programming) will be required to register for VAT-EU. In addition, he will face new obligations related to the submission of EU VAT information for the months in which he sells services to taxpayers from other European Union countries.