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Poland – ICA, inquiry to ECJ

By November 26, 2019July 10th, 2021No Comments

Hot news – The Voivodship Administrative Court (VAC) in Gliwice refers to the European Union Court of Justice for a preliminary ruling related with intra-community acquisition of goods.

Hot news – The Voivodship Administrative Court (VAC) in Gliwice refers to the European Union Court of Justice for a preliminary ruling related with intra-community acquisition of goods.

The VAC in Gliwice by decision on 4 November 2019, (I SA/Gl 495/19, Dantrade B.V. in Amsterdam), referred the following question to the ECJ for a preliminary ruling: Is art. 167 in connection with art. 178 of VAT Directive 112 must be interpreted as precluding national provisions which determine the exercise of the right to deduct input tax in the same accounting period in which the tax due is subject to settlement for a transaction constituting a community acquisition of goods, from showing the tax due for such transactions in a proper VAT declaration, submitted within the deadline (in Poland 3 months from the end of the month in which the tax obligation arose in relation to the goods and services purchased)?

We would like to remind that taxpayers in Poland (PL) and other EU countries have the right to deduct VAT from intra-Community acquisition of goods (ICA) for the period in which the tax obligation arose. However, since 1 January 2017, in Poland this entitlement has been significantly tightened due to the legislator’s temporary restriction of the right to deduct.

Currently, however, taxpayers in PL have the right to settle input and output tax resulting from ICA transactions in the same VAT return, provided that within 3 months of the end of the month in which the tax obligation arose for the purchased goods they received an invoice documenting ICA and settled the tax due in the correct VAT return.

Thus, exceeding the three-month deadline for VAT settlement for ICA, taxpayers are required to report the tax due in the period when the tax obligation arose (i.e. retroactively) and VAT calculated in the current settlement (in general the date of invoice receipt). As a rule, this results in tax arrears and penalty interest.

It is worth to notice that the VAC in a few judgements stated that Polish regulations in this respect are incompatible with the VAT Directive. The VAC refers to the case law of the ECJ C-518/14 (Senatex), where the ECJ indicated that EU countries may impose sanctions for breaches of formal requirements. Nevertheless, such actions are allowed only if the rules enacted do not violate the principles of proportionality and neutrality. Taxpayers should not be punished with postponing the right to deduct and interest due to failure to comply with formal conditions, if the material conditions for the deduction have been met. Also, it is worth taking into consideration another ECJ judgment in case C 590/13 (Idexx Laboratories), in which the subject of the discussion was the taxpayer’s right to deduct VAT arising from ICA. In this judgment, the ECJ stated that the basic principle of VAT neutrality requires a deduction of input tax if the basic requirements are met, even if the taxpayer did not meet certain formal requirements consisting in reporting ICA.

The VAT Directive provides for two basic conditions for the right to deduct input tax in relation to ICA: the chargeability of VAT and the relationship of the purchased goods with taxable activities.

The ECJ states that EU countries may introduce formal conditions for exercising the right to deduct, but failure to meet them cannot result in depriving the taxpayer of the right to deduct input VAT.

In this context, the activity of the VAC in Gliwice is very important, and taxpayers in PL should closely follow the case in the ECJ. The result will have a significant impact on their business activity, both in terms of reporting, VAT returns corrections and in particular potential possibility

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of applications for overpayment and interest refund which were accrued incorrectly by the tax authorities.

For further details please feel free to contact: Łukasz Woźniak, Senior Tax Consultant lwozniak@asbgroup.eu and Anna Szafraniec, CEE VAT compliance Manager aszafraniec@asbgroup.eu.