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The new EU VAT Directive, the so-called ‘Quick Fixes’ package, was introduced in Poland on 1st July 2020

The VAT treatment of chain business transactions has so far caused many doubts and inconsistencies due to the lack of harmonised rules at EU level. Since 1st January this year, amendments to EU Council Directive 2006/112 have come into force as part of the so-called ‘Quick Fixes’ package, which standardise the handling of chain/series transactions in the EU. Poland introduces these changes with a 6-month delay on the basis of the VAT Act, which was amended on 1st July 2020.

The Act published at the end of June this year introduces amendments to, among others, the Corporate Income Tax Act, the VAT Act, the Act on Exchange of Tax Information with other countries and other laws.

This Act will be accompanied by the implementation of a package of changes resulting from EU Directive 2018/1910, the so-called ‘Quick Fixes’, which concerns VAT.

The new regulations have been in force since 1st July 2020.

Below we present the most important information in this respect.

Chain Transactions

If there are 3 taxable entities involved in the chain (A-B-C) and taxable person A sells the goods to taxable person B (an intermediary), taxpayer B sells the goods further to taxpayer C the goods are sent directly from A to C, and the transport is organised by entity B, then the general rule is to assume that it is transaction A – B “mobile” and is subject to a 0% VAT rate in the country from which the goods were sent.

Taxpayer B acting as an intermediary may change this rule. Another solution will be introduced when the intermediary (B) hands over to his supplier (A) the identification number for intra-Community transactions given by the country from which the goods are dispatched or transported. In such a case, the intra-Community. In such a case, the intra-Community transaction will be attributed to a sale between the intermediary and the subsequent buyer (in the above example, the intra-Community transaction would be a supply between a second and third party).

The key to determining the VAT consequences of chain transactions under the new rules is therefore to identify the intermediary (B) who, by providing a specific VAT-EU number, decides in practice how the transactions in the chain should be taxed.

It is worth revising the existing business arrangements and conditions for the supply of goods to EU counterparties, so that the VAT effects of the new rules are optimal for the parties to the transaction. A practical problem may arise, for example, when an intermediary (B) decides to provide its number assigned in the country of shipment of goods after the invoice has been issued and the transaction settled, which would result in a tax arrears with the supplier, who rightly applied the 0% rate to the supply to them. It is therefore very important to determine in advance which number will be used by the buyer acting as an intermediary and to obtain this number from them.

These changes apply only to intra-EU trade. Chain transactions involving imports and exports will be accounted for according to the existing rules (with any related concerns).

“Call-Off Stock”

From a VAT point of view, we deal with a ‘call-off’ warehouse when:

  • the goods are transported to another Member State, the seller (X) knows exactly who the buyer (Y) is (knows their identity and tax status),
  • the goods transported go first to a consignment warehouse located in the Member State of delivery of the goods and from there, at a convenient moment (I.e. when they are needed for further resale, production, performance of the service), they are collected by the purchaser (Y).

The new provisions of the VAT act, which are intended to ensure compliance with the Directive, slightly modified and simplified characteristics of the consignment warehouse, called the ‘call-off stock’ procedure. The most important differences resulting from the new regulations are:

  • entity (X) no longer has to meet the condition of not registering for VAT in the country where the ‘call-off stock’ is maintained. It may be registered in that country and may not merely have its registered office or permanent place of business there,
  • the ‘call-off stock’ no longer has to be operated exclusively by entity (Y), but can also be operated by a third-party,
  • entity (Y) no longer has to notify the head of the tax office of its intention to operate a consignment warehouse before (X) first enters the warehouse, but under the new rules it will have to make such a notification within 14 days of the first entry of goods into the warehouse,
  • entity (Y) may be replaced by another entity during the ‘call-off stock’ procedure and this will not affect the loss of simplification resulting from the procedure,
  • entity (X), entity (Y) and, possibly, a third-party running the warehouse, will have to keep detailed records of goods, which are defined by Council Implementing Regulations (E) 282/2011,
  • entity (X) will have a new obligation, in the form of the necessity to submit the VAT-EU Summary Information in the country of dispatch, at the moment of transfer of the goods, with the VAT number of the future buyer of the goods,
  • the maximum period of storage of goods in the warehouse without tax obligation is 12 months, which is a worsening of the situation, as so far it has been 24 months,
  • expiry of the maximum storage period, loss or destruction of the goods requires proof of intra-Community acquisition for the movement of own goods by entity (X),
  • if, within 12 months, there has been no transfer of the right to dispose of the goods as owner and they have been re-dispatched to the Member State from which they were originally dispatched, and subject (X) has registered their re-dispatch, the intra-Community acquisition of the goods shall be deemed not to have taken place.

Analysis of changes:

The advantages of the new regulations for entrepreneurs are certainly that:

  • The consignment warehouse will be able to be run by a third-party, which should significantly expand the circle of entities that will be able to benefit from these regulations.
  • Introduction of the possibility to replace the recipient. For example, if a Polish taxpayer delivers manufactured goods to a warehouse in Germany and the German counterparty does not purchase them, it will be possible, under certain circumstances, to replace this counterparty with another one, and such a change will not deprive the parties to this transaction of the benefits resulting from the ‘call-off stock’ procedure.

Introduction of the possibility to re-export the goods. If a Polish taxpayer does not manage to sell the goods at all, they will be able to transport the goods to Poland and will not suffer any consequences as the transaction will be tax neutral.

The downside for entrepreneurs is certainly:

  • The reduction, from 24 months to 12 months, of the time during which goods can be stored before delivery.
  • The need to prove intra-Community acquisition in the event of loss or destruction of the goods, which is often caused by factors independent of the parties to the transaction. Particular problems may arise for the food industry, which deals in perishable goods.

Finally, it should also be mentioned that in addition to the above-mentioned changes, an amendment to the Tax Criminal Code was also made, introducing a new criminal offence, namely failure to report to the tax office on the operations of a warehouse under the ‘call-off stock’ procedure, or to do so in time. The person responsible for such omission will be subject to a fine for fiscal offences.

Rate of 0% for intra-Community ‘Supply of Goods’

According to the published Act – in order to apply 0% rate for intra-Community supply of goods – there is an absolute requirement for the buyer of the goods to provide a valid VAT identification number, as well as for the supplier to submit a correct VAT-EU summary information.

If the above conditions are not met, the 0% rate may be applied only after the taxpayer has explained this defect in writing to the head of the tax office.

At this point, we would like to remind you that the directive was to be implemented in EU countries by 1st January 2020. Nevertheless, Poland did not meet this deadline and therefore at the end of 2019. The Ministry of Finance issued an announcement at the end of 2019. The taxpayer could choose – and then consistently apply in all aspects related to the VAT settlement of a given transaction – whether to apply the provisions of the Directive or the existing provisions of the polish VAT Act from 1st January 2020.

From 1st July 2020, the taxpayer will be obliged to apply only the new provisions of the VAT Act.


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