Polish and the EU provisions on VAT taxation of building and delivery of the ships
Polish provisions on VAT taxation of building and delivery of the ships have been included in the law of 11 March 2004 on the taxation of goods and services, consolidated text published in the Journal of Laws 2017 No 1221 (hereinafter: the Polish VAT Act).
According to article 5 paragraph 1 of the Polish VAT Act, the VAT tax shall be applied to:
- payable shipment of goods and payable services rendered on the territory of the country;
- export of goods (out of the EU);
- import of goods within the territory of the country;
- intra-community acquisition of goods for remuneration in the territory of the country;
- intra-community supply of goods.
According to article 41 paragraph 1 in the light of article 146a point 1 of the Polish VAT Act, it is stated that until end of 31 December 2018, the standard VAT rate for goods delivery amounts to 23%.
According to article 83 paragraph 1 point 1 as an exclusion from article 41 where the standard VAT rate is stated, the legislature provided a 0% VAT rate for the following deliveries:
- vessels used for navigation on the high seas and carrying for consideration of passengers or used for commercial, industrial or fishing purposes, including in particular:
- seagoing passenger liners, seagoing cruise ships and similar vessels for the carriage of passengers; seagoing ferries of all types (classified under PKWiU No. ex 126.96.36.199),
- offshore oil tankers for oil carriage, processed oil products, chemicals and liquefied gases (classified under PKWiU ex 188.8.131.52),
- seagoing refrigerators, excluding tankers (classified under PKWiU ex 184.108.40.206),
- other seagoing ships for the carriage of dry (solid) cargo, excluding sea-going ships without a propulsion (classified under PKWiU ex 220.127.116.11);
- seagoing fishing vessels, offshore fishing vessels and other offshore vessels for processing or preserving fishery products (classified under PKWiU ex 18.104.22.168),
- seagoing pushers and seagoing tug boats (classified under PKWiU ex 22.214.171.124),
- seagoing icebreakers (classified under PKWiU ex 126.96.36.199),
- sea-based rescue ships and lifeboats (PKWiU ex 188.8.131.52);
- vessels used for offshore fishing (PKWiU ex 184.108.40.206);
Since the legislator used the word “in particular”, it means that the above list shall not be limited, and the 0% VAT rate may be applied also to other vessels if they are a seagoing vessel.
According to the explanatory letter of the Polish Ministry of Finance of 21st December 2016, currently the reduced VAT rate of 0% shall be applied to the supply of vessel used for shipping on the high seas which are used for passenger transport, commercial, industrial or fishing purposes. The criterion of the watercrafts intended for use on the high seas is that it applies to those carrying passengers for a fee and those used for commercial, industrial or fishing purposes.
The condition of usage the vessel for seagoing voyages excludes the possibility of making deliveries with the VAT rate of 0% to units used for the carriage of persons or goods by inland waterways or for navigation in territorial waters.
The 0% VAT rate does not apply to units which main function is not to transport passengers or things.
The above criteria resulting from EU regulations – remain unchanged.
Polish regulations are compliant in this matter with Article 148(c) in the light of Article 148(a) of the Council Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, 11.12.2006, p. 1), where it is stated as follows:
Member States shall exempt the following transactions:
(a) the supply of goods for the fuelling and provisioning of vessels used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities, or for rescue or assistance at sea, or for inshore fishing, with the exception, in the case of vessels used for inshore fishing, of ships’ provisions;
(c) the supply, modification, repair, maintenance, chartering and hiring of the vessels referred to in point (a), and the supply, hiring, repair and maintenance of equipment, including fishing equipment, incorporated or used therein;
Since both Polish and EU regulations on the delivery of vessel include a conjunction (and) between phrases “vessels used for navigation on the high seas” and the types or the purposes of the vessels, only following vessels shall be consider as allowed to be delivered without charging the VAT:
- vessels used for navigation on the high seas and carrying passengers for reward,
- vessels used for navigation on the high seas and used for the purpose of commercial activities
- vessels used for navigation on the high seas and used for the purpose of industrial activities
- other that are listed above but are out of the consideration