The VAT acts of member states are subject to
harmonisation upon which EU VAT law is being standardized.
This, however, is not aimed at eliminating the national law
The VAT directive (2006/112/EC) is binding to each EU
country, but leaves the choice of form and methods to the
national authorities who transpose it into national
legislation. Consequently, member states’ VAT acts
of are not fully coherent and unique rules and solutions can be
There are many VAT rules in Poland which do not stem
directly from the EU VAT Directive, and therefore we could ask
whether these laws are compliant. Polish VAT law includes,
among others, additional requirements which must be fulfilled
to reduce the taxable amount in the case of non-payment by the
other contracting party (so-called bad debt relief).
However, the most frequently discussed VAT issue in Poland
is the restriction of the period for input VAT deduction with
respect to transactions settled using the reverse charge
mechanism (e.g. intra-community acquisitions (ICA) or imports
Until the end of 2016, Polish taxable persons could report
input and output tax resulting from ICAs and the import of
services in the same VAT return, irrespective of when the
invoice was received and when the output VAT was reported. Such
VAT treatment made purchases of goods from the EU and service
imports neutral even if they were not reported on time.
New regulations have been enforced
The situation changed from January 1 2017.
Since then, taxpayers have been entitled to
deduct input VAT paid on a transaction for which the reverse
charge mechanism applies, provided that the output VAT from
this transaction is reported in their VAT return within a
maximum of three months from the end of the month in which the
tax became chargeable. If the output tax is reported later,
input VAT can be deducted in the VAT return for which the
filing deadline is still pending (current VAT return). Output
VAT, however, must still be reported in the VAT return
submitted for the month in which the tax became chargeable.
Practical aspects of the new
The practical impact of this is that where a reverse charge
transaction is reported after the three-month time limit, the
input and output tax are reported in VAT returns for different
periods. This can lead to tax and interest arrears. As invoices
documenting ICAs and imports of services are usually received
with some delay, reporting output VAT within this time limit is
not always possible. So, many taxable persons in Poland face
the problem of being obliged to pay interest due to not
reporting these transactions on time.
Moreover, to meet the (three-month) deadline for reporting
input and output VAT from a reverse-charge transaction in the
same VAT return, and avoid any negative consequences, taxpayers
need to correct their VAT returns by this rather short
deadline. A subsequent correction of VAT returns is usually
required when additional invoices are received. This causes a
lot of administrative work for taxpayers.
In the judgements from September 29, 2017 and May 15, 2018,
the Polish provincial administrative courts held that taxable
persons shall not be obliged to pay interest due to reporting
ICAs after three months (case no. I SA/Kr 709/17 and no. III
SA/Wa 2488/17). It was pointed out that, in accordance with the
principle of neutrality, taxable persons cannot bear the
economic burden of VAT. Moreover, taxable persons cannot report
output VAT until the invoice is received, and it is the
supplier who must be blamed for the delay in providing it.
Therefore, the regulations were considered to be non-compliant
with EU law.
Despite this tax-friendly approach of the administrative
courts in Poland, the regulations not been changed and nobody
has yet submitted a preliminary ruling to the European Court of
Justice. Moreover, in August 2018 one of the provincial
administrative courts presented a negative opinion in this
respect (I SA/Op 246/18). Given that the tax authorities and
taxable persons are obliged to obey the provisions of the
Polish VAT Act, as long as the rules remain unchanged then
interest will have to be paid. Will the tax-friendly approach
of administrative courts have an influence on the lawmakers? Or
will the preliminary ruling to the ECJ be submitted? These are
some of the questions raised.