Import of services from a non-EU contractor registered for VAT

In the global economy, we more and more often use the services of companies from outside Poland, but generally belonging to the European Union. It happens, however, that the service is provided by a contractor from outside the EU, often by corporations with a global reach. How to settle the import of services from a non-EU contractor registered for VAT?

Service concept

At the outset, let us recall the definition of a service from the Value Added Tax Act. This definition can be found in Art. 8 sec. 1 of the Value Added Tax Act (hereinafter referred to as the VAT Act). The provision of services is understood as any service provided to a natural person, legal person or organizational unit without legal personality, which does not constitute a supply of goods within the meaning of Art. 7, including:

1. transfer of rights to intangible assets, regardless of the form in which the legal transaction was performed,
2. an obligation to refrain from performing an action or to tolerate an action or situation,
3. provision of services in accordance with an order of a public authority or entity acting on its behalf or an order arising from the law.

Taking into account the above definition, the provision of services under the tax on goods and services has a broader meaning than the provision of services in the common understanding.
Pursuant to the content of the provisions referred to above, any service provided to natural persons, legal persons or organizational units without legal personality, which does not constitute a supply of goods within the meaning of Art. 7 of the Act is considered a service under the Act. The concept of service (performance) should therefore be understood as any behavior, which may include both an action (doing, doing something for the benefit of another person) and omission (not doing or tolerating). When assessing the nature of a provision as a service, it should be borne in mind that the Act includes in the group of services any provision that is not a supply of goods.

Service import

The definition of import of services can be found in Article 2 point 8 of the VAT Act. Import of services should be understood as the provision of services for which the recipient is the taxpayer. The legislator mentioned situations in which the buyers of services become VAT taxpayers. They are also legal persons, organizational units without legal personality and natural persons purchasing services, if the following conditions are jointly met:

1. the service provider is a taxpayer who has no registered office and no fixed place of business in the territory of the country, and in the case of services to which art. 28e, the taxpayer is not registered in accordance with article 5. 96 sec. 4,
2. the service recipient is:

• in the case of services to which Art. 28B-the taxpayer referred to in art. 15 or a non-taxable legal person referred to in art. 15, registered or obliged to register in accordance with art. 97 sec. 4,
• in the case of transfer of single-purpose vouchers, the place of supply of services related to these vouchers is the territory of the country - the taxpayer referred to in art. 15 or a non-taxable legal person referred to in art. 15,
• in other cases - the taxpayer referred to in art. 15, having a registered office or a permanent place of business in the territory of the country or a non-taxable legal person referred to in art. 15, established in the territory of the country and registered or obliged to register in accordance with art. 97 sec. 4.

Taking into account the above, the import of services consists in taxing the services purchased by the taxpayer in the country with VAT in the event that these services are performed by a foreign entity. In such a situation, the taxpayer, i.e. the entity obliged to tax VAT services, is their purchaser - the recipient, and not the service provider. The recipient pays the tax due on the services provided to him. In order to be able to recognize the import of services, it is very important to provide the service. In the individual ruling of April 3, 2017, 3063-ILPP1-3.4512,61.2017.1.PR, it can be read that the service must be provided within the meaning of the VAT Act (not every service meets this definition) for the import of services to take place. Cash pooling is given as an example in this interpretation.

Place of service provision - definitions

In the case of services, it is very important to determine where the service is provided. According to the general rule expressed in the provision of Art. 28b paragraph. 1 of the VAT Act, the place of providing services in the case of providing services to the taxpayer is the place where the taxpayer who is the recipient of the service has its registered office, subject to paragraph 2-4 and art. 28e, art. 28f paragraph. 1 and 1a, art. 28 g of paragraph 1. 1, art. 28i, art. 28j and article. 28n.

Example 1.

A furniture manufacturing company that is an active VAT taxpayer in Poland purchases design services from an Italian taxpayer who does not have a registered office or a permanent place of business in Poland. In this case, the place of service provision, determined in accordance with Art. 28b of the VAT Act, will be Poland. Taking the above into account, in the analyzed case we are dealing with the import of services. The service provider, as a taxpayer from the European Union, has no seat or place of business in the country.

In the analyzed case, we are dealing with a taxpayer from the European Union. In economic practice, it happens that domestic entrepreneurs purchase from taxpayers from outside the European Union. Are we dealing with the import of services also in this situation?

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Import of services from a counterparty outside the EU

The above definition of the import of services does not distinguish the status of the service provider. It is essential that it is a taxpayer without a seat or a permanent place of business in the country. Thus, the purchase of services from a taxpayer outside the European Union should also be considered as an import of services.

Example 2.

An entrepreneur dealing in the production and sale of advertising materials ordered a US taxpayer to test and check new advertising gadgets. The US taxpayer has no seat or place of business in Poland. In this case, we are also dealing with the import of services.

In economic practice, international concerns are based in various countries. In addition, many traders are registered for VAT in various places around the world. In a situation where the entity provides its NIP from a country other than Poland, services are imported. Thus, the import of services will arise regardless of the tax identifier used by the buyer.

Demonstration of import of services from a taxpayer registered as an EU taxpayer in another country

The explanations for the declaration for value added tax (VAT-7 and VAT-7K) show that in item 27 and 28, the amounts of the tax base and the tax due on the import of services referred to in article 1. 17 section 1 point 4 of the VAT Act. In item 29 and 30, we show the amounts for which we determine the place of performance pursuant to Art. 28b of the VAT Act. Thus, if the taxpayer is registered as a VAT-EU taxpayer, the import of services in items 29 and 30 should be shown.Therefore, registration is determined by the fact of registration as an EU taxpayer in one of the European Union countries. Considering the above, if the seller of the service, e.g. from the USA, is a registered taxpayer in one of the European Union countries and provides this number on the invoice, we settle it in item 29 and 30.