VAT rate 0% in the intra-Community supply of goods

Different rules for documenting intra-Community supply of goods (PDTs) in individual Member States have long been assessed as one of the factors facilitating VAT fraud. With that in mind, In 2016 The European Commission has decided to seek solutions that could at least temporarily improve the rules on cross-border transactions.

The result of this work is, inter alia, Council Implementing Regulation (EU) Directive 2018/1912 to 4 December 2018, amending Implementing Regulation (EU) No Regulation (EU) 282/2011 for certain exemptions relating to intra-Community transactions 1 , introducing harmonised rules for documenting WDT.

1. Introduction

This regulation is part of a wider package, called quick fixes, which entered into force 1 January 2020 It aims to harmonise and simplify certain provisions on trade between Member States – beyond Regulation (EU) 2018/1912 also 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[2].

Given the legal nature of both documents, Regulation (EU) 2018/1912 is directly applicable in the Polish legal system, without the need to amend the Act with 11 March 2004 on tax on goods and services 3 (Next: the VAT Act), Regulations Directive 2018/1910 they must be implemented by amendment.

A project from 7 October 2019 Act amending the Goods and Services Tax Act and the Act – Tax Penal Code (list number: UC158). Finally, the regulations adopted may therefore differ from those set out below.

In addition 23 December 2019 MF has published a Communication on the implementation of quick fixes[4].

It follows that legislative work on implementation Directive 2018/1910 will not be completed in Poland before 1 January 2020 In line with the established case-law of the EU Court of Justice 5 , where a Member State has not transposed the Directive into national law within the prescribed period, individuals may rely on the provisions of the Directive before national courts against the State in all cases where those provisions are unconditional and sufficiently precise in terms of their content.

According to that case-law, a provision of EU law is unconditional if it establishes an undertaking not subject to any conditions and not dependent, in terms of its implementation or effect, on the issue by the EU institutions or Member States of any act.

This means that in the absence of implementation of the Directive, the taxpayer has the right to apply the provisions of the Directive directly, provided that these provisions are unconditional and sufficiently precise.

Implementation Directive 2018/1910 at a later date, the Polish taxpayer will be able to apply the rules during the transitional period Directive 2018/1910 or provisions the VAT Act However, whether the taxpayer chooses to apply the rules Directive 2018/1910 is the VAT Act, This should be done consistently in all aspects relating to the VAT clearance of the transaction.

2. Conditions for holding the purchaser’s VAT number

In accordance with existing legislation the VAT Act intra-Community supply of goods subject to taxation at a rate 0%, if certain conditions are met. one they were delivered to a buyer with a relevant and valid EU VAT number, given by the Member State responsible.

However, it was a formal condition which was not based on legislation Directive 2006/112 to 28 November 2006 on the common system of value added tax[6] (hereinafter: VAT Directives).

In the case-law of the CJEU[7] it was pointed out that it was not possible to challenge the taxpayer’s right to apply the rate 0% for the sole reason that no customer's VAT number is in place where all the material conditions have been met (the goods have left the country of dispatch and have reached the country of destination).

The absence of an EU VAT number therefore did not affect the lack of the possibility to apply the rate 0% by the supplier.

Objective of the amendment (in this case the amendment Article 42(1)(1) the VAT Act) is the introduction of a material nature for this condition, which means that the absence of an appropriate and valid EU VAT number of the counterparty will from now on be regarded as preventing the application of the rate 0% in WDT, even if the goods leave Poland and eventually reach foreign contractor.

The provisions do not specify how the purchaser is to transfer his EU VAT number to the supplier. In practice, this will depend on the methods of cooperation between the parties, but the method adopted should allow to prove that the information in question has been received by the supplier within a certain time limit.

It is assumed that the information on the EU VAT number should be provided to the supplier before the event giving rise to the tax obligation. This allows proper documentation of the transaction (using the right rate).

Draft Act amending the Act on Tax on Goods and Services and the Act - the Tax Code assumes that the above regulations will not apply to the supply of goods whose transport or shipment began before 1 January 2020, and finished after 31 December 2019

3. Conditions for timely submission of summary information

The material basis on which the possibility of applying the rate will depend 0%, there will also be an obligation to submit summary information. It allows tax authorities to compare the transactions shown by the taxpayer with data in the VIES system containing similar information from its counterparties.

The resulting differences may indicate abuses in cross-border transactions. So far legislation the VAT Act did not make the right to apply the rate 0% in the WDT on submission of summary information.

The failure to submit such information involved certain consequences under the law on 10 September 1999 Tax Penal Code 8 (Further: k.k.s.), however, it did not affect the method of taxation of the supply itself.

As planned Article 42(1a) the VAT Act if:

• 1) the taxable person has not complied with the obligation to submit summary information within the required time limit, or
• 2) the summary submitted does not contain correct information

– rate 0% will not apply unless the taxable person duly explains in writing the failure of the head of the tax office. The reasons for such failure may be as follows:

• 1) the WDT has been demonstrated in the summary information for an incorrect period,
• 2) an unintended error has been made with regard to the value of the supply concerned,
• 3) an old counterparty tax identification number is provided,
• 4) no summary information has been submitted or submitted after the deadline as a result of a mistake.

The obligation to properly explain the failure will be borne by the taxpayer. At the same time, according to the reasons for the project, 7 October 2019, if the deficiencies do not form part of the tax fraud, the tax authority should, in principle, consider the explanations to be appropriate. Regardless of the above, the new Article 262 The VAT Directives extend the data requirements of the summary information. Under the new rules, it will also include data on:

• 1) purchasers identified for VAT purposes to whom the taxable person has supplied goods under the WDT,
• 2) persons identified for VAT purposes to whom the taxable person has supplied the goods supplied to him by WNT,

1. taxable persons and non-taxable legal persons identified for VAT purposes for which the taxable person has provided services other than VAT-exempt services in the Member State in which the transaction is taxable in respect of which the customer is liable to pay the tax. In practice, this will be reflected in the new models of these declarations.
2. Documentation of intra-Community supply of goods

WDT documentation rules for the application of the rate 0% Regulations currently Article 42(1)(2) the VAT Act Under this provision, the WDT is taxed at the rate of tax 0%, where the taxable person has evidence that the goods have been exported from the country as part of the supply and delivered to the buyer in another EU country. The burden of proof therefore rests with the taxpayer. Provision Article 42(3) the VAT Act indicates that these evidence may be:

1. the transport documents received from the carrier(s) responsible for the export of the goods from the territory of the country from which it is clear that the goods have been delivered to their destination in the territory of a Member State other than the territory of the country, where the carriage of the goods is dispatched to the carrier(s);
2. specifications of individual cargo units.

The specified directory is not closed. If the above documents are not sufficient to clearly confirm the delivery of the goods, the evidence may also be:

• 1) commercial correspondence with the purchaser, including its order,
• 2) documents relating to insurance or freight costs,
• 3) documents confirming payment for the goods,
• 4) proof that the purchaser accepts the goods in the territory of a Member State other than the territory of the country.

Regulation (EU) 2018/1912 does not alter these provisions, which means that they will remain in force and can continue to be applied.

Objective Regulation (EU) 2018/1912 there is a regulation that, in the event of the collection of the documents indicated therein, the taxable person will be able to benefit from the presumption that the goods have been dispatched or transported from the country to a destination in another EU country, while in the event of the collection of the ‘standard’ documents, such presumption will not be provided.

The difference between the two situations in practice boils down to the fact that where the taxpayer has the documents indicated in Regulation (EU) 2018/1912 the burden of demonstrating that the goods in question did not leave the country of dispatch will be borne by the tax authority (the taxpayer will benefit from the presumption that the goods have gone away), while in the event of the collection of documents on the basis of the existing regulations, this burden will be on the taxpayer's side, as is currently the case.

The list of documents allowing the benefit of the presumption is set out in the newly added Article 45a Regulation (EU) 282/2011. Under that provision, for the purposes of applying exemptions in the WDT, goods are presumed to have been dispatched or transported from a Member State to a destination located outside its territory but within the Community, in any of the following cases:

1. the seller indicates that the goods have been dispatched or transported by him or a person third acting for and in possession of:

(a) at least two not contrary to Group I evidence, or

(b) single evidence from Group I together with any single evidence not in conflict with Group II, confirming dispatch or transport;

2) the seller has the following documents:

(a) a written declaration by the buyer confirming that the goods have been dispatched or transported by the purchaser or by the person third acting for the buyer and indicating the Member State of destination of the goods, and

(b) at least two not in conflict with Group I evidence or any individual Group I evidence, together with any single non-combatant Group II evidence confirming transport or dispatch.

Presumption occurs when the seller has non-contrary evidence which has been issued by different parties, independent of each other, from the seller and from the buyer – this is illustrated in the figure 1.

In any event, both Group I and Group II evidence must be issued by different parties which are independent of the seller and the buyer and independent of each other. This latter requirement may make it significantly difficult to obtain the evidence to benefit from the presumption.

In the EC explanatory notes published in this respect[9] it was pointed out that for the purposes of use Article 45a Regulation (EU) 282/2011 the parties will not be considered as ‘independent’:

• 1) if they operate within the same legal person, or
• 2) where there are family ties or other close personal ties, management, ownership, membership, financial or legal ties.

In practice, this may mean that the documents provided to taxable persons by companies belonging to the same group of capital will not meet this criterion.

The buyer’s declaration referred to above shall contain:

• 1) the date of issue,
• 2) the name and address of the buyer,
• 3) the quantity and type of goods,
• 4) the date and place of arrival of the goods,
• 5) in the case of the delivery of means of transport, the identification number of the means of transport and the identification of the person receiving the goods to the buyer.

There is no official pattern of such a statement. The EC explanatory notes indicate that Member States should be flexible in this respect and should not impose strict restrictions on the acceptance of claims, e.g. in paper form only, but should also accept the electronic version of these statements, if they contain the required information. The buyer shall provide the seller with such a statement in writing to 10. the day of the month following the month in which delivery was made.

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Legal basis

1. Article 45a Regulation (EU) 282/2011,

2. Article 262 VAT Directives,

3. Article 42(1)(3), Article 100 the VAT Act

The article comes from the book A. Bieńkowska and Łukasz Grzegorczyk "A review of tax changes 2020”, published by C.H. Beck Publishing House: https://www.ksiegarnia.beck.pl/18922-przeglad-zmian-podatkowych-2020-agnieszka-bienkowska