Conducting trade in second-hand goods, works of art, collectors' items and antiques often involves buying goods from individuals.
This makes it impossible to reduce the tax due on account of these purchases, and therefore, when selling taxed on goods and services, the entire value of the turnover is actually taxed and not just the value added.
In view of the above, the Law of 11 March 2004 on tax on goods and services in Article 120 specific VAT clearance procedures for supplies of second-hand goods, works of art, collectors' items and antiques (hereinafter referred to as goods) have been introduced.
The taxpayer is not obliged to settle such transactions in the margin procedure as it can settle on a general basis. The essence of this particular form of accounting is the taxation of margin, and thus actual added value.
The above entitlement provides that in the case of a business to the extent indicated above, and therefore in the case of the sale of previously acquired goods by that taxable person in the course of its business, the taxable amount is the mark-up of the difference between the amount of the sale and the amount of the acquisition, less the amount of the tax. The method of calculating the margin for the purposes of the tax on goods and services can be simplified as follows:
MARGIA = sales price – purchase price – VAT
The taxpayer is not obliged to settle such transactions in the margin procedure as it can settle on a general basis. The essence of this particular form of accounting is the taxation of margin, and thus actual added value. Otherwise, there could be multiple taxation of the same commodity, which could consequently have a negative impact on their competitiveness.
The margin procedure may be applied to goods purchased from:
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- non-taxable entities, VAT or value added tax,
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- taxable persons exempt from the tax on goods and services (because of their scope of activity) or on an individual basis (because of their turnover),
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- taxable persons where the supply of these goods was taxed in the margin system,
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Value added tax taxable persons where the supply of these goods was exempt from tax on terms corresponding to the Polish rules on the supply of second-hand goods or small-scale traders, or where the supply of those goods was subject to value added tax on terms corresponding to the Polish rules on the taxation of margins, and the purchaser has documents clearly confirming the purchase of the goods under those rules.
A common feature of the above-mentioned cases is that VAT cannot be deducted in connection with their acquisition.
The margin procedure may also be applied to the supply of:
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- works of art, collectors' items or antiques previously imported by the taxpayer,
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- works of art acquired from their creators or heirs,
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- works of art acquired from a taxable person, other than an intermediary, taxed at the rate 7%.
The mark-up is subject to written notification to the head of the tax office of the method of taxation adopted before delivery. Such notice shall be valid for a period of time two years from the end of the month in which the taxpayer made the notification. After the expiry of this period and the desire to continue exercising this right, the taxable person shall be obliged to make a second notification.
If the margin procedure is chosen, the taxpayer will not be entitled to deduct from the profit he acquires
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works of art, collectors' items and antiques imported by him;
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works of art acquired from their creators or heirs;
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works of art acquired from a taxable person who is not taxed by the margin procedure.
Similarly, the deduction of input tax procedures will not apply to goods used by the taxpayer, works of art, collectors' items and antiques taxed by the margin procedure.