Import of services - no purchase invoice and tax obligation
It happens that when buying services from abroad, the entrepreneur does not receive invoices confirming the transaction. This is especially the case with the purchase of foreign services via the Internet, such as the purchase of access to photos or computer programs. If the seller has not yet issued an invoice for the import of services, should the entrepreneur wait with the settlement of this transaction?
Import of services - a brief explanation
Import of services is a transaction for which, according to the general rules, the place of supply is defined as the place of business of the buyer. This means that, as a rule, the buyer is obliged to settle VAT on services purchased from abroad. In short, if a Polish entrepreneur imports services, he is obliged to charge and pay VAT in Poland on this account. He is also entitled to deduct input tax if the purchase is related to the taxable activity. The tax rate will in this case be the rate applied for a given type of transaction. In Poland, it will usually be 23%.
For a transaction to be considered an import of services, the following conditions must be met:
- the place of benefit is the territory of the country,
- the service provider is a taxpayer who does not have a registered office or a fixed place of business in the territory of the country,
- the service provider does not settle the VAT due,
- the service recipient is established in the territory of the country and is registered for VAT-EU.
Tax obligation in VAT and import of services
Pursuant to Art. 19a paragraph. 1 of the VAT Act, the tax obligation in the import of services arises when the service is provided. Therefore, it should be remembered that the lack of an invoice does not release the entrepreneur from the obligation to charge VAT on the import of services.
It should also be taken into account that the services:
- for which, in connection with their provision, consecutive payment or settlement dates are established, are deemed to have been made at the end of each period to which these settlements or payments relate, until the completion of the provision of these services;
- provided in a continuous manner for a period longer than one year, for which, in connection with their provision, in a given year, settlement or payment deadlines do not expire, are considered to be performed at the end of each tax year, until the completion of the provision of these services.
On what basis should the VAT be reported? - import of services and no invoice
As can be seen from the above information, the fact that the entrepreneur has not received the invoice does not release him from the obligation to calculate and report VAT on import transactions. For this purpose, the taxpayer creates a document himself, in which he shows the amount he paid for the purchased service (based on, for example, payment confirmation) as a net amount, then calculates the VAT tax and the gross amount of the service in accordance with the national rate. Additionally, if the payment was made in a foreign currency, the currency should first be converted at the average exchange rate of the National Bank of Poland as of the last business day preceding the day when the tax obligation arises.
The right to deduct VAT and the import of services
As a rule, the buyer is obliged to tax the import of services and report the output VAT, and additionally, if he is an active VAT payer, he has the option to deduct input VAT. In this case, this right applies even if the entrepreneur has not received an invoice for the purchased service. The confirmation of the above is the individual interpretation issued by the Director of the National Tax Information of May 15, 2017, ref. No. 2461-IBPP2.4512.190.2017.1.MS, in which we read that:
(...) The applicant will be able to exercise the right to deduct VAT in the tax return, which will include the amount of tax due if the tax due is settled within 3 months from the end of the month in which the obligation arose in relation to the purchased goods and services tax. (...)
Consequently, VAT on the import of services, for which the buyer is obliged to calculate the tax, will be entered both in the VAT sales register and in the VAT purchase register. It is quite an unusual situation, which also takes place in transactions related to intra-community acquisition of goods.
Imports of services not shown on time
The taxpayer has the option to settle the import of services in the month in which the tax obligation arose. If the taxpayer does not receive the invoice, as a rule, he should report the output tax anyway and has the option to deduct the input tax. If, however, after 3 months (counted from the end of the month in which the tax obligation arose), the buyer still does not have an invoice, he is obliged to correct the input tax in the period when the tax obligation arises, and the deduction becomes available only upon receipt of the invoice and then the deduction will be made during the invoice receipt period.
XYZ completed a service import transaction from a German contractor on April 14. However, she did not receive the invoice for the service until May 5. So when should the taxpayer account for output VAT and deduct input VAT on importation?
As a rule, the tax obligation arises at the time of the import transaction. Due to the fact that the transaction was made in April, a tax obligation arose this month and the taxpayer is obliged to settle the VAT due. In addition, due to the fact that the taxpayer has recognized the import of services in the statutory period, he is also entitled to deduct the tax charged in the declaration for the period in which the tax obligation arose, i.e. in the JPK_V7 file for April.Thanks to this, the transaction will be tax neutral in terms of VAT.
XYZ completed a service import transaction from a Czech contractor on April 20. However, she did not receive the invoice for the service until September 26. The company settled the transaction of importing services in April on the basis of VAT, i.e. it showed the tax due and input. Is a taxpayer who receives an invoice 3 months after the transaction has been completed, obliged to correct the input VAT? Can a VAT transaction be still neutral?
The taxpayer is obliged to show the tax due on the import of services in the period when the tax obligation arises, i.e. in April. During this period, he also gains the right to deduct VAT, even if he has not received an invoice. However, if, after the expiry of the statutory three months, XYZ still does not have an invoice, it is obliged to correct the input tax and has the option to deduct it only in the JPK_V7 file for the period in which it received the invoice, i.e. in September. In addition, the XYZ company is obliged to submit the JPK_V7 correction for April and to calculate and pay tax interest on the resulting VAT arrears.
Import of services and cost in KPiR
If the buyer of the service does not have a proof of purchase, it cannot recognize the expense as tax deductible costs. Therefore, due to income tax, the situation is different than in the case of VAT settlement.
An entrepreneur who has not received an invoice for the import of services should not include it in costs. In practice, entrepreneurs often rely on printouts of transaction confirmations, which they can often print themselves from internet portals. Then, they attach payment receipts to such confirmations, on the basis of which they recognize the expenditure as costs. However, such a procedure is risky as it may be questioned by tax authorities. A transaction confirmation printout, even if a payment receipt is attached to it, does not constitute an accounting document. Usually, he does not have the necessary data, which, according to the provisions of the KPiR, should be on the documents constituting the so-called other accounting documents listed in § 11 and 12 of the regulation on keeping the tax book of revenues and expenses.
Therefore, if an entrepreneur imports services, under VAT, he is obliged to prove the import of services and charge VAT, while an active VAT payer will be able to deduct input tax if the expenditure is related to a taxable activity. However, when it comes to recognizing the import of services in tax costs, the entrepreneur should include it only after receiving the invoice confirming the import of services.
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Import of Art. 28b - booking in the wFirma.pl system
After logging in to the wFirma.pl system, use the tab: EXPENDITURE »ACCOUNTING» ADD »VAT INVOICE» OTHER EXPENDITURE RELATED TO BUSINESS ACTIVITY, where in the window that appears, complete the required fields. In the NET field, enter the value from the summary of the received invoice. In the IMPORT FROM ABROAD AND OTHER ADVANCED tab, select the appropriate currency, select the option Import of services, art. 28b and tax the transaction with the domestic VAT rate.
The document will be included in the KPiR in column 13 - other expenses and in the VAT register of sales and the VAT register of purchases converted into PLN at the average exchange rate of the National Bank of Poland on the last business day preceding the date of the tax obligation.