Possession of a confirmation of receipt of the correction invoice (credit note) by the contractor is required to reduce the tax base resulting from the initial invoice

The Court of Justice of the European Union on January 26th 2012 (Case C-588/10, the Minister of Finance against Kraft Foods Poland SA) ruled that the requirement involving the dependency of reduction of the tax base resulting from the original invoice to the possession by the taxpayer the confirmation of  receipt of the correction invoice (credit note) received by the purchaser of goods or services as referred to in art. 29 paragraph 4a VAT Act, is within the concept of the conditions referred to in art. 90 paragraph 1 of the Directive 2006/112/WE.

As can be seen from the sentence justification presented by the Court, possession of the confirmation receipt of correction invoice by the supplier of goods or services as received by the purchaser of goods or services is suitable for this, to show that this purchaser has been informed of the fact that he should calculate the extent of his possible right to deduct VAT on the basis of the indicated correction invoice. This requirement may substantially contribute to ensure the correct collection of VAT, fraud prevention, as well as eliminate the risk of tax revenue loss. As a result, Poland can rightly claim that requirement pursues the legitimate purposes established in the relevant EU law provisions.

In conclusion, Art. 29. paragraph 4a of VAT Act which came into effect on December 1st 2008, complies with the provisions of the EU law and its application by the tax authorities is absolutely correct.

Therefore taxpayers who relied on the content of the Directive 2006/112/EC, or some of the of administrative courts judgments (e.g. the Warsaw WSA verdict from December 11th 2009, act signature III SA/Wa 1255-1209, or the WSA sentence in Krakow on April 21st 2010, act signature I SA/Kr 173/10), questioning the compliance of national legislation with the provisions of Directive 2006/112/WE unfortunately must verify their current accounts. Indeed it should be expected that the tax authorities, relying particularly on the sentence of the Court will pay attention to the proceedings of taxpayers related to the correction invoices and moment of submitted returns adjustments.

Services of installation of technical equipment and industrial systems and technical supervision services are not services connected with immovable property

According to the Polish VAT Act the place of performance of services connected with immovable property shall be the place where the property is located. In addition to the list of services included in the art. 28e, which are recognized as services connected with immovable property, the provisions of the VAT Act do not provide explanation of how to define the concept of services connected with immovable property.

Many experts have opinion that this concept should be interpreted by analyzing the examples of services quoted in that provision. The analysis leads to the conclusion that services connected with immovable property should be considered as such services when they lead to a change in legal or physical status of a given immovable property.

For example in the situation when services provided by the company are directly related to the installation for the production of wood fiber boards and these services include installation of the individual modules and supervision of that installation, it should be recognized that the services do not apply to immovable property (building workshop) as such, but to the installation located inside the immovable property (building).

From a technical point of view, there is a possibility of dismantling the supplied modules and transferring them to another location. Installation is not permanently integrated into the building in which it is located. The fact that it is placed inside the building should not mean that any services related solely and directly to the installation (or its individual modules) should be considered as provided for this building. The purpose of those services is not to perform any change in legal or physical status of that building. To conclude, it should be noted that in the majority of cases the installation services (assembly) are not services connected with immovable property within the meaning of art. 28e of Polish VAT Act.

Taxpayer is not the only one required to prove the correctness of intra-Community supply.

In the judgment dated 6 July 2011, ref. Act I, FSK 1058/10 the NSA stated that is not only to the obligation of the taxpayer to prove that the intra-Community supply of goods took place. This requirement also applies to the tax authorities.

In the presented case the tax authorities questioned that the taxpayer can apply 0% VAT rate to the intra-Community supply of goods he made, by indicating that the documents submitted by the taxpayer clearly did not confirm the supply of goods outside of the country and invoiced contractor’s identification number specified on the invoice related to a different entity than the one whose details could be seen on the invoice.

The taxpayer claimed that all the documents owned by him confirm that indeed intra-community delivery of goods took place and therefore he was entitled to apply the 0% VAT rate to given supply.

NSA concluded that the taxation of the intra-community supply in the country of supplier (as it was ruled by the tax authorities in this case), without making the tax inspection of the intra-community transaction in the country of a buyer, in fact results in double taxation of the transaction. In order to avoid this inconsistent with the very nature of VAT, tax authorities inspecting the correctness of taxation of intra-community transaction should take actions in order to explain the noted discrepancies. This requirement was not performed by the tax authorities.

They should – according to the court – before questioning the taxpayer’s right to apply 0% VAT rate for intra-Community supply of goods, request an explanation of discrepancies and to ask for audit of the contractor from the Tax Authorities in the country of a buyer.

This judgment of a NSA is an example that the Polish administrative courts, in the area that tax authorities require excessive formal requirements concerning the documentation of intra-Community supply of goods, are on the side of taxpayers, providing them with protection from adverse decisions of tax authorities.

Re-invoicing in VAT

Re-invoicing in VAT is not a separate activity therefore the tax liability (the tax point) that shall arise upon the resale of the service is the moment of its performance. Polish Supreme Administrative Court recently upheld the cassation appeal of the tax authorities in the case regarding the re-invoicing, that is the resale of the services. NSA decided that the tax point is not the moment of issuing of the re-invoice, but the tax liability shall rise upon the performance of the original services.

The provision of Article 8 paragraph 2 of the Polish VAT Act implements the Article 28 of the 112th Directive. The article states: “Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself”.

The transfer of the expenses for the definitive acquirer occurs through issuing of the re-invoice. In fact, it is an invoicing of the service performed by a third party, for example an another company. NSA noted however that sometimes the tax liability shall rise at the moment of issuing the re-invoice for example when the VAT Act binds it to issuing of an invoice.

The principles of recognizing the export of goods from Poland

Is it possible to demonstrate that goods were exported from Poland if the export customs procedure began in the another Member State? This question was answered by a panel of 7 judges of the Supreme Administrative Court in a recent Resolution (dated June 25th 2012 r. signature I FPS 3/12).

According to the NSA resolution the condition for the export of goods from the territory of a country outside of the EU, is met not only when the procedure of the export of the goods starts through the export declaration submitted at the customs office on the territory of Poland, but also when the export customs procedure began in the another Member State. It is necessary according to NSA however, to prove that the export of goods outside the territory of EU occurs during the transport which begun on the territory of Poland within the single (the same) supply of goods.