Implications of Brexit for provision of services

Provision of services

The end of the transition period on December 31 2020 will most probably change the way some services are provided by Polish taxpayers to British non-taxpayers. Those services are listed in Article 28I of the Polish Act on VAT and cover such services as: licensing, advertising, advisory services, legal services, financial services. At this moment such services are taxed in Poland with Polish VAT rate. Starting from January 1, 2021 provision of such services for the persons residing in the UK shall not be taxed under Polish VAT regime.

International transport

Until transition period ends Polish taxpayer providing transport service to a non-taxpayer is obliged to apply VAT according to the Polish tax rules. When the transition period ends such transport to the UK and from the UK shall be treated as international transport as in Article 83 Paragraph 3 of the Polish Act on VAT. That means that transport services from Poland to the non-taxpayer in the UK should be taxed with 0% VAT rate for the transport that happens on the territory of Poland (with the proper documentation) and when the goods cross territory of Poland such transport will be outside of Polish VAT regime and will not be taxed in Poland.

Transport on the territory of Poland

According to the Article 28f of the Polish Act on VAT when the whole transport of goods happens on territory of Poland and is provided to a taxpayer from a third country (UK when the transition period ends) then it shall be taxed in Poland. The British taxpayer will be able to retrieve VAT paid in Poland based on the regulations from EU 13th VAT Directive.

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Implications of Brexit for B2C sales

Implications of Brexit for B2C sales

Great Britain left the EU on the 1st of February 2020 but for VAT purposes it will be treated as any other EU country till 31st of December 2020. After that day, if the transition period is not extended, Brexit will have impact on majority of the transactions including sales to private individuals (B2C).  

Distance sales after Brexit 

Distance sales is similar to intracommunity delivery but it is made to the buyer that is not a VAT payer and that is not obliged to report intracommunity acquisition in a VAT return. Distance sales is generally taxed in a country to which the goods are being sold and correct VAT rate for that country shall be applied. This means that if a company is selling goods to private individuals in different member state, it is required to register for VAT purposes in that member state. The only exception is when an yearly threshold of sales is not exceeded. This threshold varies for every member state from 35 thousand EUR up to 100 thousand EUR. Any sales below this threshold should be reported as domestic sales in the country from which the goods are being sent.  

The above rules apply to the goods sent from UK and to UK until December 31 2020. After the transition period starting from January 1 2020 distance sales shall be treated as import/export transactions. Sales to British buyers will have to be made using a custom agency and it will be treated as export with 0% VAT rate. The buyers will have to pay custom duties (if applicable). 

VAT refund for visitors to the EU  

Private individuals that do not permanently reside on the territory of the EU can reclaim VAT paid for the goods purchased in Poland when they are moving these goods in an intact form in personal luggage outside of the EU territory. In order to do so a purchase document with a stamp of customs and tax office is required.  

That means that after transition period ends, British citizens will be able to reclaim VAT from goods purchased in Poland and such sales should be reported in Poland with 0% VAT rate. 

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