Novelization project [1] Goods and Services Tax Act (VAT Act, hereinafter ‘UVAT’) and the Tax Penal Code of 7 October 2019 to be implemented Directive 2018/1910 to 4 December 2018 amending Directive 2006/112 as regards the harmonisation and simplification of certain provisions in the value added tax system concerning the taxation of trade between Member States (hereinafter ‘VAT Directive’).
The changes will include rules for the use of call-off stock, chain transaction documentation and the application of the rate. 0% VAT on intra-Community supply of goods (the so-called ‘WDT’).
Member States have until the end of this year to make changes, and the revised rules should enter into force with New Year. So far, the Ministry of Finance has issued an explanatory notice on implementation Directive 2018/1910 to present rules for the application of the VAT rules after 1 January 2020 [2]
Current chain transactions regulation
Chain transactions are a type of transaction between several counterparties so that the goods are shipped from first from entities (in the chain) to the last, but each of the entities involved in the transaction recognizes the supply of goods to another. Where several operators supply the same commodity in such a way that first of which they shall issue the goods directly to the last buyer, it shall be considered that each of the operators involved in the operations has delivered the goods.
A particular feature of the chain transaction, as opposed to the usual schedule of placing orders and movements of goods between different entities, is that only the one physical release and transport of goods within the legal meaning, but with the implementation of several intermediate deliveries. Given that each entity, when concluding a contract with the next entity, has in the legal sense a commodity like the owner, although entities outside first and the latter do not physically possess the goods purchased, it should be assumed that the characteristics to be recognised are met, in accordance with Article 7(1) VAT Act, each transaction for the supply of goods.
In the case of participation in a chain transaction of an international nature where the goods are moved between different countries, it becomes important to determine which supply should be attributed to the transport of goods, as this is crucial to establish the place of supply for each supply in the chain and thus to determine the tax consequences for the entities making the individual supply in the chain transaction.
Place of supply of goods dispatched or transported by the supplier, their purchaser or person third is the place where the goods are at the time of commencement of dispatch or transport to the buyer.
Where several operators supply the same commodity in such a way that first from which they shall issue the goods directly to the last buyer, the goods being dispatched or transported, the dispatch or transport of the goods being assigned only one delivery — this supply is a mobile transaction.
Where the goods are dispatched or transported by the purchaser who also makes its delivery, the shipment or transport shall be deemed to be assigned to the delivery made to that buyer unless the delivery conditions indicate that the shipment or transport of the goods must be attributed to its delivery.
After dispatch or transport one the supply of other supplies of goods shall be considered to be supplies of the so-called ‘fixed’.
In such a case, the delivery of goods which precede the dispatch or transport of goods shall be deemed to have taken place at the place where the dispatch or transport of goods begins; and if it follows the dispatch or transport of goods, shall be deemed to have taken place at the place where the dispatch or transport of goods ends.
It follows that all deliveries prior to dispatch or transport of goods are taxed in the country of departure of transport or dispatch, while all deliveries subsequent to transport or dispatch are taxed in the country of completion of transport or dispatch of those goods.
Objectives of the amendment
The issue of changes is regulated by the proposed new wording Article 22 uVAT, specifying the place of delivery of the goods from which it appears that on several successive deliveries of the same goods transported directly between first the supplier and the last buyer, in the legal sense we will deal with only one the supply, which affects the establishment of the place of delivery of the goods.
All transactions carried out before the shipment will be taxed in the country of dispatch, and deliveries made after the shipment shall be subject to taxation by the State of final recipient. Where this distribution takes place between different EU countries, delivery to the intermediary will be considered a mobile transaction [3] .
Therefore, when the goods are dispatched from Poland to the final customer in Hungary with the help of an intermediary located in Slovakia, the Polish taxpayer recognises the WDT and the Slovak taxpayer WNT.
Therefore, the Slovak intermediate taxpayer will be required to register EU VAT in Hungary, to settle intra-Community acquisitions of goods, in order to later make a delivery of a fixed nature to the Hungarian recipient.
The draft amendment further states that if the intermediary has provided its supplier with the EU VAT number given to him by the State of dispatch, then the shipment made by him will be considered a mobile transaction. [4] .
Therefore, referring to the previous example, the Slovak taxpayer is the organiser of the transport of goods, which means that the transaction between the intermediary from Slovakia and the final recipient from Hungary is crucial – subject to the advance of the delivery by the Slovak taxpayer of his VAT identification number given to him in Poland to the taxable person sending the goods from Poland.
Then we are dealing with a fixed transaction by the Polish entity for the Slovak intermediary shown in Poland, and the intermediary, being a VAT payer registered in Poland of the EU, shows the WDT to the Hungarian recipient, who in turn recognizes WNT in Hungary.
The intermediary may also use the services of a person third, But he'll still retain the status of a realtor if he does it on his behalf.
In the case of the dispatch or transport of goods from Poland to non-EU countries by the supplier buyer, it is assumed that the transaction is then attributable to the supply made to that buyer, unless the terms of the transaction indicate that its supply is attributable [5] .
Thus, in an example transaction of shipping goods from Poland to Iceland through an EU VAT taxable person in France, a mobile transaction occurs between a Polish taxpayer and a French intermediary.
This implies an obligation for the sending entity to demonstrate its exports from Poland, and an intermediary from France shows imports in Iceland, after which it makes domestic deliveries of a immovable nature in Iceland.
The existing provisions will apply to transactions commenced before 1 January 2020, a completed 31 December 2019, i.e. The moment of commencement of dispatch or transport must be the day before the New Year and the delivery must take place after the closure of the old year.
Conditions for applying the rate 0% VAT on intra-Community supply of goods
Until now, a catalogue of documents entitled to apply the rate 0% was quite wide, and the practices of individual Member States were also different. In the light of the new legislation, the catalogue has been significantly reduced and is clearly defined.
Well, there will be two additional conditions of application of the VAT rate 0% Both are known to Polish taxpayers, but for now they have different, because only formal, meaning, and in the new state of the law they will gain the status of substantive requirements (assuming that the Polish legislature implements the principles of Community law).
first, the additional condition for sine qua non to apply a zero rate will be to obtain information about its EU VAT number from the recipient – it is now only important that the recipient has the status of the EU VAT taxable person, together with such a number. Therefore, it will be necessary for the purchaser to inform the supplier of the number when ordering the goods or otherwise by correspondence on the delivery.
second The requirement will concern the presentation of the supply in the EU Summary Information (VAT).
Currently intra-EU supplies are also shown in the EU VAT return, but the possible omission of such transactions does not result in a lack of entitlement to the VAT rate 0% However, according to the requirements of the new provisions of the Directive (and sooner or later national law) only because of a failure to provide EU VAT or an error in this respect, the supply will have to be taxed on goods and services charged at national rates.
However, it may be avoided from error and retain the right, provided that it is properly explained to the head of the tax office in writing.
For example, if a taxable person fails to submit such summary information within the time limit due to an emergency, he should send a written statement of reasons to the warden for the failure to comply with the documentation obligation.
In the light of the proposed provisions, it is unclear whether a written justification together with a post-term declaration will be sufficient (and voluntary disclosure), whether it will still be necessary to send a separate document to retain the right to apply the rate 0% Unless the proposed legislation is supplemented in this respect, this is likely to depend on the practice of tax authorities.
For redesigned design Article 42 uVAT setting the conditions for applying the rate 0% for the intra-Community supply of goods, has been introduced Under section 1 point 1 an additional requirement in the form of a supplier to provide its EU VAT number to the buyer in the Member State responsible.
It is further noted that the rate will not apply if the supplier has not submitted a summary information on the WDT or the information has been submitted does not meet the formal requirements for the data listed therein. Under Article 100(8) uVAT.
Here, too, a written explanation may be given to the head of the tax office in order to preserve the rate in question in the transaction.
The purchaser will still be required to settle the intra-Community acquisition of the goods in accordance with the tax rate in force in the country where the goods are purchased.
The seller will be able to make the adjustment only if the buyer proves that at the time of delivery he was a VAT taxable person and holds an identification number for intra-Community transactions.
If the buyer has not yet been registered in the course of the transaction process for intra-Community identification purposes, the supplier shall clear the transaction as a domestic delivery, after which he will be able to correct the EU buyer's VAT registration procedure.
Transitional provisions indicate that these regulations apply to exports commenced before 1 January 2020, Having regard to the completion of the delivery after 31 December 2019.
The change and codification will also be accepted as a set of transport documentation authorising the application of the rate 0%. Regulation introduces 2 Groups of evidence:
- (a) documents relating to the dispatch or transport of goods, such as the signed transport note CMR, the bill of lading, the invoice for goods by air or the invoice from the carrier of goods;
- (b) the following documents:
- • insurance policy in respect of the dispatch or transport of goods or bank documents confirming payment for the shipment or transport of goods;
- • official documents issued by a public authority, for example a notary, confirming the arrival of the goods in the Member State of destination;
- • receipt certificate issued by the warehousekeeper in the Member State of destination, certifying the storage of goods in that Member State.
This implementing regulation Regulation (EU) 282/2011 introduces a presumption by which the goods covered by the WDT are deemed to have been exported from one EU country to second Member State. This may be accepted if the seller is in possession of:
- – minimum two evidence relating to dispatch or transport not contrary to each other and issued by two different parties independent of each other, from the seller and buyer;
- – any single proof from first groups together with any evidence from the group 2, not in contradiction with each other and issued by 2 different parties independent of each other, from the seller and buyer.
Where dispatch or transport is carried out by a purchaser or an operator third acting on its behalf, the seller should additionally have a written statement from the buyer confirming that the goods have been dispatched or transported by the buyer or entity third and indicating the Member State of destination of the goods.
[1] https://legislacja.rcl.gov.pl/docs//2/12322050/12601952/12601953/dokument402089.pdf
[2] https://www.gov.pl/web/finanse/implementacja-dyrektywy-20181910-dot-tzw-pakietu-quick-fixes
[3] section 22 section 2a Amendment
[4] section 22 section 2b Amendment
[5] section 22 section 2d Amendment