On the occasion of the European Crafts Day – a holiday that took place yesterday, i.e. 24 March 2019, We look at how the new VAT matrix regulates the taxation of different types of ice cream.
The European Parliament's celebration of craft ice cream aims to convince people to consume these natural sweets. They are devoid of chemical additives and come from high-quality ingredients, so they have a better taste than those produced on a large scale in the factory. Therefore, it is worth mentioning the new VAT rates that will apply to the abovementioned products.
Ice cream and water lollipops
The tax case of an entrepreneur who did not know whether to apply 5% the VAT rate on water ice cream, or should be accounted for in accordance with the guidelines of the tax office, which qualified the water ice cream as ‘other non-alcoholic beverages’ rather than ‘other ice’, because during the course of the investigation the IRS found that the ice cream was sent to the sellers in liquid form and therefore ordered the trader to use 22% VAT rate (the case concerned the dispute before VAT increases in 2011).
To the detriment of the entrepreneur, the health department confirmed that the manufacturer distributed "water lollipops in liquid form as a drink with possible possibility of freezing".
The entrepreneur argued that maintaining the frozen product during transport would require a specialised cold store, which would make logistics costs more expensive.
On the other hand, WSA in Wrocław, who ate a dictionary of Polish, acknowledged the manufacturer's right, arguing that the word “creams” does not matter in what state of focus or taste it is still simply ice cream and their form should not have the value of the tax due.
The court acknowledged the producer's right yet the entrepreneur went bankrupt.
Ice cream in the restaurant and ice cream to go
Another question when selling ice cream is raised is whether ice cream sold in and outside the restaurant should be covered by different VAT rates. In the individual interpretation of the date 28 March 2018, Number.
0112-KDIL1-3.4012.113.2018.1.JN, The Director of National Tax Information concluded that the sale of ice cream, which the taxpayer classified as ‘cream and other edible ice cream’, would constitute the supply of goods at a tax rate of 5% VAT, since the sale of the goods in question will be carried out without waiter service and other support services which would indicate the performance of the service.
The interpretation confirmed that the sale of ice cream by the taxpayer would be subject to 5% VAT rate because the sale of ice cream will be issued through a window without any additional service.
New rate of VAT on ice cream and other edible ice
Legendary hot dogs, octopuses, or ice cream are products that are associated with absurd boundaries in the Polish tax system. This is to be prevented by a new VAT rate matrix. As a rule 5% the VAT rate is to include basic food products. On the other hand, products such as hot dogs, octopuses or ice cream are difficult to qualify for.
The amendment of the VAT matrix is intended to prevent the above mentioned situation from occurring in the future, in which the ice-cream producer goes bankrupt due to the position of the tax office, stating that he considers ice-cream to be a drink rather than ice-cream.
The solution is the new VAT matrix adjusting VAT rates to the criteria for differentiating products recognised for the statistical consumer. As stated on the website of the Ministry of Finance, changes in VAT rules imply a change in the way goods and services are identified for VAT purposes and a departure from the use of PKWiU from 2008 to:
- •Combined Nomenclature (CN) for goods and
- •the current PKWiU from 2015 services.
According to the new VAT matrix, the products will be classified at the following rates:
•
Ice used for food and other refrigeration purposes — 23%
•
Ice cream and other edible ice, whether or not containing cocoa — 5%
Amendments introducing the new VAT matrix come into force on 1 June 2019, except Article 1(6) point (h), point 7 in Article 42c(9) point (b) and point 16, which enter into force on the day 1 January 2020
Author: Paweł Boś, law student at the Kozminski Academy in Warsaw, employee of Russell Bedford