May 27, 2020
It is worth remembering commercial transactions in which more than two entities are involved, e.g. additionally an intermediary. It is about the so-called chain transactions. At the end of the transitional period, both Polish and British taxpayers will be required to carry out additional registration formalities or corresponding changes to the chain transactions used.
Example
The German company sells goods to a company in the UK, which then resells them to a Polish entity, while the transport of the goods takes place directly from Germany to Poland. Such a transaction would generally require registration of a UK entity in Poland for VAT purposes. The transport ends in Poland, and that is where the transaction would be subject to VAT.
In such a situation, however, the regulations allow for simplification – the so-called triangulation. The condition that allows applying the simplification is the participation of three entities from the Member States. At the end of the transitional period, simplification will not apply as the condition of the involvement of three entities registered for VAT in three different Member States will not be met (if the UK company has no other VAT registration).
Example
In the situation described in the earlier example, the simplification is that an entity from the United Kingdom would not have to be registered for VAT in Poland, and any VAT settlement in Poland would be made by the final purchaser – the Polish company. At the end of the transitional period, if the UK company will not have another VAT registration, it will be obliged to register in Poland for VAT purposes (and to appoint a tax representative) and settle the ICA transaction from Germany, and then domestic sales to the Polish taxable person.
Similarly, there may be consequences for Polish traders involved in chain transactions to the UK (i.e. the need to register for VAT in the UK for import and further sales purposes).
In conclusion, companies trading with the UNITED KINGDOM, in particular within the supply chain, will have to analyze their transactions and redefine its consequences in VAT. In some cases, VAT registration in another country may be required, and thus include additional administrative costs. Read more about our Fiscal representative service http://qqtcdof.cluster026.hosting.ovh.net/europetax/services/fiscal-representative/
May 22, 2020
On May 7th 2020 the Europen Court ruled in the case C 547/18 (Dong Yang Electronics Sp. z o.o. v Dyrektor Izby Administracji Skarbowej we Wrocławiu) that „the existence, in the territory of a Member State, of a fixed establishment of a company established in a non-Member State may not be inferred by a supplier of services from the mere fact that that company has a subsidiary there, and that supplier is not required to inquire, for the purposes of such an assessment, into contractual relationships between the two entities.”
In 2010 a company incorporated under Polish law, Dong Yang, signed a contract for the supply of services with a company incorporated under Korean law, LG Korea. Dong Yang was supposed to assemble printed circuit boards (PCB) from components and materials supplied by a subsidiary of LG Korea, LG Display Polska.
Dong Yang did not charge VAT on the invoices for services provided to LG Korea as it has been informed by LG Korea that it did not have a fixed establishment in Poland i.e. it did not employ anyone nor had technical resources and immovable properties.
The Director of the Tax Administration Chamber, Wrocław decided that Dong Yang has supplied services in Poland as LG Poland constituted a fixed establishment of LG Korea and claimed from Dong Yang the amount of VAT for provided services. According to the Director of the Tax Administration Chamber, Dong Yang should have investigated contractual relationships between two companies and conclude that the beneficiary of services was in fact LG Poland.
Dong Yang did not agree with that and the continuation of this case took place in court. The Regional Court decided that a clarification from the Court of Justice is required, and the request for a preliminary ruling was sent:
1. “Can it be inferred, from the mere fact that a company established outside the European Union has a subsidiary in the territory of Poland, that a fixed establishment exists in Poland within the meaning of Article 44 of Directive 2006/112 … and Article 11(1) of Implementing Regulation No 282/2011 … ?
2. If the first question is answered in the negative, is a third party required to examine contractual relationships between a company established outside the European Union and its subsidiary in order to determine whether the former company has a fixed establishment in Poland?”
The European Court has ruled as quoted above. This judgment is an important one for suppliers involved in providing services to foreign companies e.g. storage, labeling or logistics services. Tax authorities have been very keen to recognize in such situation a fixed establishment so this case may change this approach.
More details can be found in the ruling here.
Read more about our Tax Compliance Services http://qqtcdof.cluster026.hosting.ovh.net/europetax/services/tax-compliance-in-the-eu/
Apr 19, 2020
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.
Check our service VAT compliance in EU http://qqtcdof.cluster026.hosting.ovh.net/europetax/services/vat-compliance-europe/
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