Accounting for import of services
In economic trade, entrepreneurs more and more often use the possibility of making transactions with foreign contractors. It is worth noting that they are not limited only to the countries of the European Community. Amendments to the provisions on tax on goods and services have brought about a lot of controversy as regards the tax obligation and the principles of deductions. What is the situation with the import of services?
When does the import of services occur?
The general definition of the import of services is included in the general provisions of the Act of March 11, 2004 on tax on goods and services. According to Art. 2, point 9 is the provision of services for the performance of which the taxpayer is the recipient of the service referred to in art. 17 sec. 1 point 4. Thus, in most cases the buyer of the service will have the obligation to settle VAT on a given transaction.
It is worth paying attention to what conditions must be met for a transaction to be considered an import of services, namely:
- the service provider should be a taxpayer who does not have a registered office or a permanent place of business in the territory of the Republic of Poland,
- while, in the case of real estate services - Art. 28e, the taxpayer is not registered in accordance with article 5. 96 sec. 4,
- the service recipient is:
- in the case of services to which Art. 28b - a taxpayer or a non-taxable legal person that has made or is required to register in accordance with art. 97 sec. 4,
- In other cases:
- a taxpayer with a registered office or permanent place of business in the territory of the Republic of Poland,
- a legal person who is not a taxpayer, with its registered office in the territory of the Republic of Poland, which is registered or obliged to register in accordance with art. 97 sec. 4.
Art. 97 sec. 4 of the VAT Act
The head of the tax office registers the entity that made the notification in accordance with para. 1, as a VAT-EU taxpayer.
In other words, if an entrepreneur running a business in Poland imports services, he is required to charge and pay VAT in the country where he operates.
Import of services and the tax base
With regard to the import of services, no separate provisions have been established regarding the determination of the tax base. Therefore, reference should be made to the general rule contained in Art. 29a of the VAT Act.Under the first paragraph, the taxable amount is whatever is the consideration that the supplier has received or is to be received from the buyer for the provision of services. In particular, these are:
- taxes, duties, fees and other charges of a similar nature, except for the amount of VAT,
- ancillary costs, such as commission, packaging, transport and insurance costs, charged by the provider to the buyer or recipient.
According to Art. 30 c of paragraph 1. 1, the import of services shall not be considered a situation where the value of the service has been included in the taxable amount for the intra-Community acquisition of goods or the value of the service, because on the basis of separate provisions, it increases the customs value of the imported goods.
Tax obligation - general rule
As in the case of determining the tax base, when determining the moment when the tax obligation arises, one should take into account the general principles. Therefore, one should follow the provisions contained in Art. 19a of the VAT Act, according to which the tax obligation arises when the service is provided. However, in the case of partially performed services, the service is also deemed to have been performed in relation to the part for which payment has been determined.
In a situation where the subject of the transaction are services performed on a continuous basis, for which consecutive payment terms are set - they are considered to be performed at the end of each period to which the payments relate. For continuous services provided for a period longer than one tax year, the tax obligation arises at the end of each tax year, if due to their provision in a given year, payment deadlines do not expire.
An important issue is also the advance payment before the actual performance of the service, as the tax obligation arises with the settlement of the obligation.
Principles of documenting the import of services
From January 2014, the definition of an internal invoice was removed from the regulations, and thus, taxpayers from that moment have the freedom to document transactions related to the import of services. When receiving an invoice from a foreign contractor, the taxpayer is obliged to make appropriate calculations in order to determine the VAT tax base. Currently, the entrepreneur can carry out these activities on any internal document created by him or perform appropriate calculations directly on the invoice received from the seller.
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Online advice for businessesIn the case of invoices issued in foreign currencies, the taxpayer is obliged to convert into zlotys in accordance with the applicable rules in art. 31a paragraph. 1 of the VAT Act. According to the cited provision, conversion into zlotys is made according to the average exchange rate of a given foreign currency announced by the National Bank of Poland on the last business day preceding the day when the tax obligation arises.
Another solution, permitted by the legislator, is to make appropriate conversions according to the last exchange rate published by the European Central Bank on the last day preceding the date of the tax obligation. When applying the solution to a currency other than the euro, the conversion rate of each should be used against the euro.
Right to deduct VAT on imported services
As a rule, a taxpayer who uses the purchased services for taxable activities has the right to deduct input tax at the time the tax obligation arises. Pursuant to Art. 86 sec. 2 point 4 lit. and the VAT Act, the amount of input tax is the amount of tax due for the provision of services, for which, in accordance with Art. 17 sec. 1 point 4 or 8, the taxable person is their recipient.
However, it is important that the taxpayer meets the conditions entitling him to a deduction. It is obliged to show the amount of tax due on the import of services in the tax declaration in which it should be settled.
If, on the other hand, the taxpayer fails to deduct the input tax on the import of services in the period when the tax obligation arises, then the taxpayer has the option to do so in two subsequent accounting periods.