The legal structure of the tax, not its name, is important

It follows from the caselaw that the interpretation of tax rules cannot only apply the linguistic interpretation of the provision in question, although it is prima facie, but must be guided by a consistent outcome of that interpretation and by an internal, external and functional system interpretation.

Legal provisions are not separate entities and in order to reach the essence of their meaning they need to be considered in the assessment of administrative courts in relation to other regulations of the normative act and other laws.

This should be the case in the case of compatibility between the concepts of goods and services and value added tax, which was analysed in the interpretations of individual tax laws and judgments of courts.

Actual state and sequence of events

Director of the Tax Chamber in Bydgoszcz in an individual interpretation from 19 October 2016 1 it found incorrect the taxpayer’s position on how to determine the value of revenues subject to tax on income from natural persons obtained from the provision of construction and horticultural services in Sweden.

The applicant was a civil partnership partner who is a registered active VAT taxable person and an EU VAT taxable person.

The applicant asked whether the revenue taxed on personal income should include the gross amount or the net amount of revenue if the value added tax included in its services declares and settles on the territory of Sweden.

In his opinion it should be a net income, because according to Article 14(1) Act on 26 July 1991 on personal income tax 2 (hereafter: u.p.d.o.f.) “for income from the activities in question under Article 10(1)(3), the amounts due, even if they are not actually received, shall be considered after excluding the value of the returned goods, the discounts granted and the accounts.

The taxable persons selling goods and services taxed on goods and services shall be deemed to be revenue from that sale to be less taxed on goods and services."

The taxpayer, arguing his position, cited the justification of the NSA judgment from 4 July 2013 3 , in which it stated, inter alia, that ‘the mechanism and legal structure of the tax referred to under national law as a “tax on goods and services” and under Union law as “value added tax” are identical.

In this sense, the above concepts are synonymous, describing the same tax.” However, the Director of the IS found the taxpayer’s position to be incorrect, on the grounds that the tax on goods and services must be regarded as being the tax on which the Act of 11 March 2004 on tax on goods and servants 4 (Next: the VAT Act) and recalling Article 2(11) that law, according to which ‘as far as further legislation refers to value added tax, it means value added tax imposed on the territory of a Member State, except for the tax on goods and services imposed by that law’.

In the opinion of the IS Director in the VAT Act There is a clear distinction between the concept of value added tax and the concept of tax on goods and services and, consequently, such a distinction applies also to the provisions of u.p.d.o.f.

The identification of value added tax in force in a Member State other than Poland, with the tax on goods and services operating in the Republic of Poland, is therefore without legal arguments, and the applicant's revenue from the provision of services in Sweden should be accounted for without being deducted by value added tax.

Since the applicant’s request to remedy the infringement proved unsuccessful, he lodged a complaint with the Provincial Administrative Court in Gdańsk, which, by judgment with 26 April 2017 5 set aside the above interpretation. On the other hand, the Chief of the National Tax Administration brought a cassation complaint, which the Supreme Administrative Court dismissed at the hearing 26 June 2019 .6 .

Uniform position of administrative courts

The Provincial Administrative Court in Gdańsk indicated in that judgment 7 , that the interpretation contested by the applicant infringes the law in such a way as to justify its elimination from legal trade.

That court also divided the NSA’s position from the judgment with 4 July 2013, that the value added tax is synonymous with the tax on goods and services and the provision Article 2(11) the VAT Act constitutes a ‘legal definition and an orderly (...), but is not a substantive provision which, alongside the tax on goods and services, constitutes a new form of taxation – value added tax’.

The Court of First Instance stressed that at the time of Poland's accession to the EU "we are dealing with the identity of the value added tax with the Polish tax on goods and services and their neutral character" 8 , and the applicant has the right to reduce sales revenue by due tax on goods and services, ‘which is appropriately named for Union trade on the ground the VAT Act, according to Article 2(11) that Act, is the term “value added tax”.’ The Court of First Instance found the position of Director of IS in Bydgoszcz to be inadequate, that the reduction in revenue in question under Article 14(1) u.p.d.o.f.

applies only to goods and services tax, not value added tax.

Whereas the Supreme Administrative Court in that judgment with 26 June 2019 dismissed the cassation complaint due to the lack of substantiated grounds and stated that the problem under consideration had already been the subject of NSA decisions, including cited, with 4 July 2013 9 , In addition, ‘the mere fact that the term “goods and services tax” is used in Poland does not mean that the tax is taxed out of the EU value added tax system’. The Court also pointed out that the prohibition of tax discrimination is one from the foundations of the Polish and European legal system, and the lack of the possibility of reducing the revenue by value added tax due in the territory of another EU country, in view of granting such an opportunity to reduce revenue only by a national tax on goods and services is a manifestation of discrimination.

The epilogue in the above issue is the individual interpretation of the Director of National Tax Information from 5 November 2019 10 , which after reconsidering the case due to judgments of the WSA in Gdańsk 26 April 2017 11 and NSA from 26 June 2019 12 considered the applicant’s position correct with 2 August 2016, according to which the net amount should be included in the revenue taxed on personal income.

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1 No TPB1/4511-699/16-1AK. 2 i.e. Journal of Laws of 2019, item 1387 as amended 3 reference no. II FSK 1545/11. [4] i.e. Journal of Laws of 2018, item 2174 as amended 5 reference no. I SA/Gd 211/17. 6 reference no. II FSK 2422/17. 7 reference no. I SA/Gd 211/17, op. cit.

8 The WSA in Gdańsk draws attention to regulations Directive 2006/112 Council 28 November 2006 on the common system of value added tax (Official Journal of the European Union L, No. 347 to 11 December 2006, p. 1 as amended). 9 Also in NSA judgments with: 25 February 2016, reference no. II FSK 3141/13; 11 January 2018, reference no.

II FSK 3371/15; 27 February 2018, reference no. II FSK 442/16; 8 May 2018, reference no. II FSK 926/16; 31 July 2018, reference no. II FSK 2128/16; 4 April 2019, reference no. II FSK 1035/17. 10 reference no. ITPB1/4511-699/16-7/19/AK. 11 reference no. I SA/Gd 211/17, op. cit. 12 reference no. II FSK 2422/17, op. cit.