Export of services outside the European Union - worth knowing

Service-Tax

The export of services occurs when the place of supply of services, i.e. their actual taxation, is in the territory of another state. The place of taxation of a given service is determined not by the place of its actual performance, but the "place of its provision" indicated by the provisions of the VAT Act. The features of an export service are provided by the provision of services for which the foreign buyer of the service is obliged to settle VAT. For the Polish service provider, it is then an activity that is not subject to this tax.

The essence of the export service

Currently, taxation of services provided to foreign contractors is subject to completely different rules than their performance for domestic buyers.The characteristics of the former exports of services (in the current legal state the concept of "exports of services" does not exist) are those for which the place of supply is in the territory of another country, that is, they are taxed in the buyer's country. However, contrary to the basic principle of taxation of services at the place of establishment, place of business or place of residence of the service provider, it is not the place of actual performance of a given service that determines its place of taxation (as was the case in the case of export of services), but the place indicated by the provisions of the VAT Act. the benefits which depend on the type of service, the service buyer and the fulfillment of additional conditions. Regulations in this area are very diverse.

Export of services and determination of the place of performance

Therefore, regardless of whether the service for a foreign entity is provided in the country or outside it, the place of its taxation is determined by the "place of its provision" indicated for it in the VAT Act. It depends primarily on the type of service provided and the entity that provides (or purchases) it. This means that the entity obliged to settle VAT is not always a Polish service provider, even if the service is provided in the country and not abroad. For some services, the foreign buyer will always be required to settle the tax. For others, additional conditions will have to exist that will shift the taxation of the service to the buyer.

Different rules of "place of supply of services" apply to:

  • real estate services,
  • services in the field of culture, art, sports, science, education, entertainment, transport and auxiliary services to transport services, valuation of movable property, services on movable property.

The place of supply of intangible services, regardless of where they are actually provided, is always the place where the purchaser of the service has its registered office, permanent place of business or permanent address or place of residence, where these services are provided to:

  • natural or legal persons and organizational units without legal personality, having their seat or place of residence in the territory of a third country, and
  • taxpayers having their seat or place of residence in the territory of the Community, but in a country other than Poland.

If the service is provided to a contractor from outside the country and outside the European Union, the tax obligation is transferred to the buyer of the service. In such a situation, he will be obliged to settle the tax on this service for its import. For a Polish company, it will be an activity that is not subject to VAT. The company should document the service with a simplified invoice without the amount of VAT due. If the service is purchased by a natural person from abroad, the service provider will be obliged to tax the transaction and will have to charge the domestic VAT rate.

The second type of services for which the taxation obligation may be shifted to the buyer of the service (i.e. they can meet the characteristics of export services) are services for which the place of supply is determined according to the place of their actual performance.

This is the case for services:

  • in the field of culture, art, sports, science, education or entertainment,
  • real estate related services - including services provided by appraisers and real estate brokers, and services for the preparation and coordination of construction work, such as architects and construction supervision. The catalog of these services is open, which means that they may also include other real estate-related services (e.g. real estate rental and lease services),
  • auxiliary to transport services, such as loading, unloading, reloading and similar activities,
  • valuation of movable tangible property,
  • on movable tangible property.

Therefore, if the company will provide training services to foreign contractors in Poland, the place of their provision will be the territory of the country, and the Polish company will be obliged to settle VAT. If, on the other hand, the service is provided outside the territory of the country, it will be taxed in the country where it is performed. The buyer of the service will then be obliged to settle the tax.

Documenting and accounting in the declaration

If the service is not taxable in Poland, it should be documented with a simplified invoice, i.e. without showing the amount of tax due. The invoice should contain the annotation: "reverse charge". On its basis, the customer will be obliged to settle the tax. However, the Polish company is not deprived of the right to deduct VAT on the expenses incurred in the country related to the provision of this service. This right applies if the provision of these services in the country entitles to such a deduction (i.e. when they are subject to VAT in the country).

In the case of exports of services, the rate no. The value of the benefit must be shown in the JPK_V7 file (in item 11), even though the service is not taxable. The value of the service is shown in the JPK_V7 file only when in relation to the provided service subject to taxation outside the territory of the country, it is entitled to a reduction in output tax or the right to return input tax. Therefore, if the company would provide a service to a foreign contractor that is subject to VAT exemption in the country, e.g. a training service, it should not show its value.

It should be noted that the provisions of the VAT Act do not specify in which month the taxpayer should include in the declaration the value of export services that are subject to taxation outside the territory of the country. Due to the fact that this is a non-taxable activity, the provisions of the Act do not specify the moment when the VAT obligation arises for this type of services. They only indicate the moment when this obligation arises for services provided in the country. However, the opinion of the tax authorities was accepted that in the case of providing services to foreign contractors, the same procedure should be followed as in the case of providing services to domestic contractors - the value of services should be included in the declaration for the month in which the tax obligation would arise, if the services were provided domestically.

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Rate on the invoice date

The application of the appropriate exchange rate for VAT purposes is governed by Art. 31a paragraph. 1 of the VAT Act. According to its wording, if the amounts used to determine the tax base are specified in a foreign currency, conversion into zlotys is made according to:

  • the average exchange rate of a given foreign currency announced by the National Bank of Poland on the last business day preceding the day when the tax obligation arises or
  • the last exchange rate published by the European Central Bank on the last day before the date on which the tax arises (in the case of currencies other than the euro, it is converted using their respective conversion rates against the euro).

Documentation of export services

Since the taxpayer providing export services (as opposed to the taxpayer who exports goods) does not have a SAD document confirming the exportation, the fact of providing export services should be documented with both a VAT invoice and a bank receipt of payment for the service provided. The taxpayer should also have documentation that would confirm the performance of services outside Poland. Therefore, it may be useful for evidence purposes to conclude all agreements and additional arrangements in writing with a foreign contractor.

Export of services, how to invoice in the wfirma.pl system

The wfirma.pl system users can easily and quickly issue invoices to foreign contractors. To do this, go to the tab REVENUE »SALE» EXHIBITION »ISSUE AN INVOICE, where, after completing the data, in the rate field, select NOT SUB.

The invoice issued in this way will be correctly shown in the VAT declaration and in the JPK_VAT file generated via the system. Detailed information on issuing sales invoices to foreign contractors is provided in the article: Sales invoice for a foreign contractor - how to issue