Principles of taxation of services provided electronically

Service-Tax

Electronic trade services are becoming more and more popular. Among them, the most common are the sale of virtual items that are sent via the Internet between the parties to the transaction, e.g. currency or accessories for the virtual world of the game. Most of the people involved in such activities have doubts as to the application of the correct VAT rate. There is also a problem with determining the rules on which to tax the obtained income.

Electronic services according to the VAT Act

Virtual transactions, the subject of exchange of which is intangible, transferable with the use of information technology, may be considered electronic services in the light of the provisions of the Value Added Tax Act. The above interpretation of the tax authorities is all the more possible if in return the person who is the seller receives remuneration in the form of money.

The definition of electronic services was specified in the Act of July 18, 2002 on the provision of electronic services. The provision of the service by electronic means takes place without the simultaneous presence of the parties (remotely), through the transfer of data at the individual request of the service recipient. The service is sent by means of electronic data processing devices, and its entirety is sent, received or transmitted over the telecommunications network.

As a rule, goods and services tax are subject to, inter alia, delivery of goods against payment and provision of services against payment within the territory of the country. However, pursuant to Art. 8 sec. 1 point 1 of the above-mentioned of the Act, the provision of services should be understood as any performance made for a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods. These benefits also include the transfer of rights to intangible assets, regardless of the form in which the legal transaction was performed.

With reference to EU regulations

In accordance with the general provisions of the above-mentioned of the Act, electronic services should be understood as services provided electronically, referred to in art. 7 of the Council Implementing Regulation (EU) No 282/2011 of March 15, 2011. According to the aforementioned article of the regulation, services provided by electronic means include services provided via the Internet or an electronic network, which must meet the following conditions:

  • be automated,
  • require minimal human participation,
  • their implementation would be impossible without the use of information technology.

Electronic services include in particular (Article 7 (2) of the Regulation):

  • general deliveries of products in digital form, including software, its modifications or newer versions,
  • services enabling or supporting the presence of enterprises or persons on the electronic network, such as a website or website,
  • services generated automatically by a computer and sent via the Internet or an electronic network in response to specific data entered by the recipient,
  • the transfer of the right to auction goods or services for a fee via a website operating as an online marketplace,
  • Internet service packages offering access to information, in which the telecommunications element is auxiliary and secondary,
  • the services listed in Annex I to the Regulation.

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Accordingly, the provision of the services mentioned at the beginning, for which the seller receives remuneration, defines him as a VAT payer, and thus - should be taxed on such sales. On the other hand, the legislator did not provide for either a reduced rate or tax exemption for electronic services. Therefore, if the transaction takes place in the territory of the country, it should be taxed at the standard rate of 23%.

Sales of electronic services and income tax

As it results from the Act of July 2, 2004 on the freedom of economic activity, the provision of services in an organized and continuous manner meets the basic condition for considering such activity as conducting business activity (Art. 2).

Therefore, when deciding to provide services for the sale of virtual products by electronic means for profit, you should start a business. It is possible by submitting the CEIDG-1 application to the city office, where the taxpayer chooses the rules on which he wants to settle the income obtained. In such a case, can the entrepreneur benefit from lump-sum taxation on recorded revenues? Yes, yes.

The entrepreneur may settle on the basis of a lump sum, if he conducts a service activity in the field of trade, during which he sells previously purchased products (goods) or goods in an unprocessed state (Article 4 (1) (3) of the Lump-sum Income Tax Act). Pursuant to the above-mentioned provisions, a person providing electronic services may exercise the right to a lump sum, because the object of his activity are virtual goods offered in unprocessed form. Therefore, pursuant to Art. 12 sec. 1 point 5 lit. b the appropriate flat rate that the taxpayer can use is 3%.

The above is confirmed by the position taken by the Director of the Tax Chamber in Łódź in the individual interpretation of October 31, 2013 (reference number IPTPB1 / 415-531 / 13-2 / MD). The applicant in the present case intended to open a business providing retail sales of virtual computer game items, such as virtual game currencies. These items were to be resold in the same form as purchased by the applicant. The tax authority stated the following: “With the above in mind

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it should be stated that if, as a result of actions taken by the Applicant, the purchased goods (goods) are not processed into the above-mentioned meaning, these items (goods) intended for resale will be treated as goods - meeting the definition contained in art. 4 sec. 1 point 4 lit. a) the act on flat-rate income tax on certain revenues earned by natural persons. Therefore, the activity consisting in the sale of virtual game items should be included in the service activity in the field of trade. "

In line with the above, a person who intends to provide services electronically, e.g. in the form of resale of virtual currency used in games, should report the performance of business activity no later than on the day of obtaining the first income. The taxpayer then has the full right to benefit from the lower flat rate. It should be remembered that the virtual sales in question should be taxed with the basic domestic VAT rate.