Purchase and sale of goods made in another EU country - how to settle?

Service-Tax

We have already analyzed various variants of the purchase and sale of goods in Poland many times. It should be noted, however, that such situations may arise when a Polish taxpayer purchases and then sells in another EU country. Therefore, it is worth considering how to account for the purchase and sale of goods made in another EU country in terms of Polish regulations and how to show them in the tax declaration.

Purchase from another EU country

As a rule, VAT is territorial in nature, which means that only activities whose place of delivery is Poland are subject to taxation. The case of the purchase of goods and the deduction of input tax is similar. This possibility exists only for purchases made in Poland.

As indicated in art. 86 sec. 1 of the VAT Act, to the extent that goods and services are used to perform taxable activities, the taxpayer has the right to reduce the amount of tax due by the amount of input tax. Importantly, however, only Polish VAT is subject to deduction. On the other hand, a taxpayer who buys goods in another EU country and does not transport them to Poland, pays the VAT appropriate for the country of purchase. It is not a Polish VAT tax, which means that it is not deductible in the scope of the Polish tax settlement.

Let us remember that in accordance with Art. 22 sec. 1 point 3 of the VAT Act, the place of delivery of goods neither shipped nor transported is the place where the goods are at the time of delivery. Therefore, if a Polish taxpayer buys goods in another country and does not transport them to Poland, it is not WNT. The place of taxation of such goods is in the country of purchase.

Example 1.

The Polish VAT payer purchases the goods in Germany. The goods are not shipped to Poland. As a consequence, the Polish taxpayer pays the VAT included in the purchase price. This is German VAT and cannot be deducted in your Polish tax return

Since this type of purchase of goods made in another country is not subject to Polish regulations, it will not be shown in the VAT declaration. Purchase of goods in another EU country, which are not transported to Poland, is not subject to the provisions of the Act on tax on goods and services. As a result of the purchase, this should not be shown in the JPK_V7 file.

Purchase and sale of goods made in another EU country and VAT-REF

We cannot forget that Polish regulations provide for the possibility of recovering VAT paid in another country. This is done through a VAT-REF application which is submitted through the Polish tax authority to the tax administration of the country where the value added tax has been paid.

However, we must clearly emphasize that when a taxpayer purchases goods and then sells the goods in another EU country, the possibility of recovering the tax paid is limited. As indicated in Art. 89 sec. 1h of the VAT Act, the application for a refund of value added tax applies to goods and services purchased in another country used to perform activities giving the right to reduce the amount of tax due by the amount of input tax in the territory of the country. If, on the other hand, a taxpayer buys goods in another country and sells them there, we cannot speak of activities performed in the territory of the country.

Consequently, in this case, the only possibility of recovering foreign input tax is to register in the country of purchase of the goods and to refund the tax in accordance with the tax regulations there.

Example 2.

The Polish taxpayer purchased goods in Germany in order to sell them in Germany. In this case, it is not possible to recover the German VAT included in the purchase price using the VAT-REF form. The goods are used to carry out taxable activities in Germany, not in Poland. In order to recover the tax paid in Germany, the Polish taxpayer must register with the local tax office. Due to the fact that the goods purchased abroad will not be used for activities taxed in Poland, the taxpayer is not entitled to a refund of foreign value added tax.

Start a free 30-day trial period with no strings attached!

Goods sold in another EU country

If the goods are purchased and sold in the same EU country other than the territory of Poland, the place of taxation of the delivery will be that country. As we have already indicated, for both non-shipped and non-transported goods, the delivery is taxed in the country where the goods are located.

Therefore, the above means that this type of sale will not be taxable in Poland. At the same time, let us note that we can deal with two situations.

Firstly, if the Polish taxpayer does not register in the country of delivery, we treat such sale as delivery outside the country. It will still be a tax-free transaction in Poland, however, the Polish taxpayer is required to issue an invoice documenting the delivery. This invoice will not include the tax amount, and NP should be entered in the place of the rate. Additionally, there should be an annotation "reverse charge". This type of transaction is also subject to disclosure in the tax declaration.

Example 3.

A taxpayer from Poland bought goods in Germany, which he then sold to the German taxpayer. He has not registered for VAT in Germany. In this situation, it is a delivery outside the country, which is not subject to taxation in Poland. However, the taxpayer is required to issue an invoice and include the net value of sales in the JPK_V7 file submitted in Poland.

However, the situation is different if a Polish company registers for VAT in the country of sale. Then the tax settlement and documentation are carried out in accordance with the tax regulations of the country of sale. Also, this transaction is not taxable in Poland. What's more, this type of delivery is not shown in the JPK_V7 file submitted in Poland at all.

Example 4.

The taxpayer from Poland registered the company for VAT in Germany. He bought and then sold goods there to a German taxpayer. In this situation, he will settle German VAT, issue an invoice in accordance with the local regulations and submit a German tax return. The sales value is not shown in the JPK_V7 file submitted in Poland. Settlement of sales of goods made in another EU country depends on whether the taxpayer registers in the country of sale or not. Bearing the above in mind, Polish entrepreneurs who start settling the purchase and sale of goods in another EU country must remember about a few key issues. First of all, in this case there is no movement of goods, therefore we cannot talk about intra-Community supplies or intra-Community supplies.

In addition, the purchase of goods takes place for the purpose of carrying out taxable activities in a country other than Poland. As a result, Polish provisions on the deduction of input tax will not apply. Moreover, it is not possible to recover input tax under VAT-REF. Only foreign regulations should be applied for the refund of foreign value added tax.

Also, the supply of such goods is not taxable in Poland, but it should be remembered that the issue of showing in JPK_V7 depends on the circumstances of the lack of registration in the EU country where the delivery is made.