Tax explanations for documenting VAT WDT

The introduction of changes in the settlement of WDTs – in the context of the correct application of national or EU rules – has raised many concerns for taxpayers supplying goods within the EU. Ministry of Finance to demonstrate the mutual relationship between VAT rules and EU Regulation No. Directive 2018/1912 1 in the context of the resulting obligations to document WDT issued tax explanations on documenting WDT for VAT purposes[2].

1. VAT and EU regulations for WDT

WDT documentation rules from 1 January 2020, are included in both VAT and EU legislation, i.e. in EU Regulation No Directive 2018/1912, being one from elements of the so-called "Quick Fixes" package.

EU Regulation No Directive 2018/1912 introduces the so-called presumption that there has been a WDT, i.e. that the goods have been sent/transported from one EU country to second (the taxable person has appropriate supporting documents). However, the absence of documents listed in EU legislation does not automatically deprive the taxpayer of the right to apply the rate 0% VAT to WDT. The taxpayer can demonstrate that a WDT has been established on the basis of the documents indicated in the VAT (Article 45a).

The reason for the changes made by the European Commission was a wide variety of rules in force in the Member States for documenting WDT, which were often used in tax fraud. The purpose of the amendment is to harmonise the rules for documenting WDTs — to specify certain circumstances in which goods are deemed to have been dispatched or transported from the territory one Member State to another Member State.

On 17 December 2020 The Ministry of Finance issued tax explanations on documenting WDT for the purposes of goods and services tax[3].

The purpose of the explanations is to clarify:

• 1) Mutual relations between EU Regulation No. Directive 2018/1912 and VAT rules on the way in which WDT is documented for VAT purposes,
• 2) rules for documenting WDT under EU Regulation No. Directive 2018/1912,
• 3) the question of overturning the presumption in question under Article 45a(1) EU Regulation No Directive 2018/1912 by tax authorities,
• 4) rules for documenting WDT on the basis of VAT rules.

The purpose of the above-mentioned tax explanations is not to clarify the specific conditions of taxation of WDT by tax rate 0%, specified under Article 42(1-2) VATU.

2. Rate 0% for WDT

According to Article 42(1) VAT, implementing Article 138(1) VATDyr, WDT is taxed at tax rate 0%, provided that:

1. the taxable person has supplied the buyer with a valid and valid identification number for intra-Community transactions, given by the Member State competent for the buyer, containing a two-letter code applicable to value added tax which the purchaser has given to the taxable person,
2. the taxable person has evidence in his records that the goods covered by the DTT have been exported from the territory of the country and delivered to the buyer in the territory of a Member State other than the territory of the country before the deadline for the submission of the tax return for the relevant settlement period,
3. the taxable person shall be registered as the EU VAT taxable person by making a tax declaration showing the supply of the goods.

Rate 0% VAT in the case of WDT shall not apply if:

• 1) the taxpayer has not submitted summary information on the DTTs or has not complied with the statutory time limit for the submission of that information, or
• 2) the summary submitted does not contain correct data on WDT
• – Unless the taxable person duly explained in writing the failure of the head of the tax office.
• 3. Mutual relations between national and EU rules

EU Regulation No Directive 2018/1912 has introduced a catalogue of documents on which the taxable person has a basis for exercising the right to assume that the goods covered by the DTT have been dispatched or transported from a Member State to a destination outside its territory but within the EU.

The introduction of the presumption that the goods have been dispatched or transported to the destination causes:

• 1) failure by the taxable person to fulfil the conditions of presumption introduced under Article 45a(1) EU Regulation No Directive 2018/1912 does not mean that it will not be possible to apply the rate 0% for the WDT,
• 2) in order for an exemption to occur, the conditions laid down must be met under Article 138 VATDyr (as appropriate Article 42(1)(1a) VATU).

Consequently, the taxpayer may document the WDT either in accordance with national or EU legislation (the right to choose).

The same position was presented by the European Commission in the explanatory notes to the abovementioned provisions.[4].

4. Documentation of WDT according to EU Regulation No Directive 2018/1912

EU Regulation No Directive 2018/1912 for the purposes of applying the exemption (rates) 0%) introduces an institution of a moving presumption that the goods under WDT have been exported from the territory one Member State to another Member State.

The documents referred to in that Regulation shall be:

1. where the goods have been dispatched or transported by the seller or by a person third acting on his behalf and have been documented:

(a) at least two Group A documents or

(b) any single evidence in Group A and any single evidence in Group B;

1. where the goods have been dispatched or transported by the purchaser or by a person third acting on behalf of the purchaser, the taxable person should have the documents referred to earlier and, in addition, a written statement from the buyer confirming that the goods have been dispatched or transported by the purchaser or by a person third acting for the buyer and indicating the Member State of destination of the goods.

It is reasonable to document the transaction:

• 1) at least two Group A documents or
• 2) any single Group A evidence and any single Group B evidence.

A written statement shall specify:

• 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.

The buyer shall provide the seller with a written statement to 10. the day of the month following the month in which delivery took place.

All documents to be documented by WDT:

• 1) they must not conflict with each other,
• 2) must be issued by two different parties that are independent of each other, i.e. from the seller and the buyer.

The following table shows the situations that may arise in economic life, as defined on the basis of the examples presented by MF. The following is not a closed directory.

For reasons of simplification, it was accepted that the formal conditions for the recognition of a transaction as a DTT were fulfilled, i.e. the taxable person has supplied the buyer with an appropriate and valid identification number for intra-Community transactions, given by the Member State competent for the buyer, containing the two-letter code applicable to value added tax which the purchaser has given to the taxable person.

5. Deadline for delivery of the seller’s statement

The buyer’s declaration 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.

It should be noted that no official model of the declaration applies.

By Article 45a(1) EU Regulation No Directive 2018/1912 the buyer provides the seller with a written statement to 10. the day of the month following the month in which delivery took place. Where a statement is received at a later date, however, taking into account the time limits resulting from the Article 42(1)(2) and Article 42(12) VATU, the seller will also benefit from the presumption, provided that all other conditions specified under Article 45a EU Regulation No Directive 2018/1912 will be fulfilled.

6. Independence of the parties and the absence of a presumption of a WDT

In line with the European Commission’s notes to determine whether two the parties are independent, taking into account the following circumstances:

1. two the parties are not considered to be ‘independent’ if they have the same legal personality, and
2. the criteria specified are applied under Article 80 VATDyr, namely the principle that parties cannot be regarded as independent of each other, between which there are ‘family ties or other close links of a personal nature, organisational, proprietary, membership, financial or legal nature’.

The result of this definition of independent parties is that both related taxable persons and the VAT taxable person carrying out intra-Community movements of goods on their own behalf will not benefit from the presumption that the goods have been transported from the territory one Member State in the territory of another Member State.

Excluded from the presumption of a WDT – in accordance with EU Regulation No. Directive 2018/1912 – there will also be a situation where delivery is made by the supplier or the buyer by his own means of transport.

7. Form of collecting documents

There are no indicated forms of collection of documents confirming the completion of the WDT. It is therefore possible to collect all documents – both in paper and in writing. The European Commission recommends in the notes issued that Member States should not impose strict restrictions in this regard.

8. Overturn of the presumption of WDT

To refute the presumption that the goods have been dispatched or transported from a Member State to a destination outside its territory, but within the territory of the EU lies with a tax authority which must prove that the goods have not actually been dispatched or transported.

To refute the presumption in question under Article 45a(1) EU Regulation No Directive 2018/1912, it is necessary for the tax authority to provide evidence (it is not sufficient only to suspect that the goods have not been dispatched or transported). In economic practice, it is possible to refute this presumption when the tax authority finds that the goods are still in the supplier's warehouse or learns that the goods were destroyed during transport (before leaving the territory of the country).

It is appropriate to distinguish between the overturning of the presumption set out above from the situation where the tax authority in the documents submitted finds errors or questions their authenticity and thus refuses to apply the rate 0% for a given transaction. The taxpayer will be entitled to submit additional documents (referred to in EU Regulation No. Directive 2018/1912 or in VAT rules) which document the application of the rate 0%.

9. WDT documenting – VAT

WDT is taxable at the rate 0%, provided that the taxable person has evidence in his records that the goods covered by the DTT have been exported from the territory of the country and delivered to the purchaser in the territory of a Member State other than the territory of the country before the deadline for the submission of the tax return for the relevant settlement period.

VATU regulations indicate a directory of basic documents for WDT transactions where transport:

• 1) was commissioned,
• 2) it is supplied by its own means to the taxpayer.

Where documents do not clearly support the delivery of the goods to a buyer located in the territory of a Member State other than the territory of the country, supporting documents may be used.

The legislator in VATU also sets out an additional catalogue of documents for the supply of new means of transport by the purchaser, without the use of any other means of transport (transport), which is a document containing data enabling the correct identification of the taxable person supplying and the buyer and of the new means of transport in question under Article 42(5) VATU.

The folder of supporting documents is an open directory. The use of additional documents shall appear when:

• 1) the basic evidence does not clearly support the delivery of the goods to the buyer located in the territory of another Member State (which may be due, for example, to irregularities in the content of those documents or the lack of certain data),
• 2) the taxpayer is unable to gather all the evidence in question. 42 section 3 VATU.

Ministry of Finance in the tax explanations discussed here with 17 December 2020 points out, however, that supporting documents should not replace the documents indicated exhaustively under Article 42(3) VATU.

At the same time, it agrees with the position expressed by the NSA in terms of 11 October 2010 (And FPS 1/10, Legalis), according to which for the application of the rate 0% with the DTT, it is sufficient that the taxpayer has only some evidence, supplemented by other evidence in the form of the documents in question under Article 180(1ordpu) of the Tax Ordinance, where they together confirm the export and delivery of goods subject to WDT to a buyer located in the territory of a Member State other than the territory of the country.

In order to prove that goods are exported and supplied to the buyer in the territory of another Member State, the content of the documents, rather than the number of them, should be important.

VAT rules do not make the application of the rate conditional 0% for WDT from the possession of original documents in paper form, they may be held in any other acceptable form.

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Legal basis

• Article 180(1) of the Tax Ordinance,

• Article 45a 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,
• Article 42(3), Article 80, Article 138(1) VATDyr,
• Article 42(1-3)(5)(11-12) VATU.

The article comes from the book C.H. Beck Publishing House Changes in Taxes and Accounting 2021 including anti-crisis shields (series: Law in practice, year: 2021) + CD, under the editor-in-chief of Professor Artur Hołday - Ksiegarnia.beck.pl.