Service-Tax

Import of services from outside the EU - when does the tax obligation arise?

Polish entrepreneurs are more and more often present on the foreign market, both as suppliers and recipients of all goods. One of the most popular purchases from foreign contractors is the purchase of electronic services, e.g. software or licenses. Often, these purchases are made from contractors from third countries, so such a transaction should be accounted for as imports of services from outside the EU.

When is there a tax obligation in importing services from outside the EU?

The provisions of the VAT Act do not provide for special conditions for the emergence of a tax obligation on the basis of VAT and PIT for the import of services from outside the EU. Therefore, when accounting for the import of services from outside the EU, the tax obligation under VAT arises in accordance with the general rule, i.e. at the time of delivery of goods, performance of a service or performance of a part of the service, unless the payment of all or part of the receivable has already occurred.

On the other hand, the import of services from outside the EU on the basis of income tax should be included in the KPIR on the date of issuing the invoice or other document constituting an accounting document, in accordance with Art. 22 sec. 6b of the PIT Act

Example 1.

XYZ purchased an IT service from a US contractor. The service was performed and paid for in May, while the invoice for the service was issued and delivered in July. On what date should she include the invoice?

The company should include the invoice on the basis of:

VAT in May;
income tax according to the invoice date, i.e. in July.

Example 2.

ABC purchased the software from an Australian contractor. The software was handed over to the company in February, while the contractor issued and handed over the purchase invoice only in April. So when should ABC show the import of services from outside the EU?

ABC company importing services from outside the EU should show in:

February - on the basis of VAT (according to the date of the service),
April - on the basis of income tax.

Is there an obligation to register for EU VAT when importing services from outside the EU?

Pursuant to Art. 97 of the VAT Act, registration to EU VAT:

in the case of active VAT payers, before making the first transaction, the following should be done:

WDT - intra-community delivery of goods;
WNT - intra-community acquisition of goods;
provide services to contractors from the EU, which will be settled in the country of residence or business of the buyer;
import of services, for the application of art. 28b, according to which the place of the provision of services is the country of the buyer.

in the case of non-VAT registered persons for EU VAT registration, before making the first transaction, the following should be made:

Intra-Community acquisition of goods for which the taxpayer has exceeded the limit of PLN 50,000 in a given tax year;
providing services to the EU contractor, which will be settled at the buyer's place of residence or business;
import of services, for the application of art. 28b, according to which the place of supply of services is the country of the buyer.

As can be seen from the above, when importing services from outside the EU, the taxpayer is required to register for EU VAT.

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How to settle the import of services from outside the EU?

When importing services purchased from a contractor outside the EU, the buyer is obliged to calculate the VAT due on a given transaction and has the right to deduct input VAT.

In the case of non-VAT customers, there is an obligation to report VAT on sales (due), and after it has been shown and paid in the VAT return, they have the right to include the VAT on purchase (charged) in company costs in KPIR in col. 13 - other expenses. The application of the reverse charge mechanism when importing services from outside the EU, as in the case of importing services from the EU, is directly related to the place of service provision specified in art. 28b of the VAT Act.

Example 3.

Company X, with a permanent headquarters in Warsaw, purchased a program license from a US company in June. Therefore, where should the transaction be taxed?

Company X should tax a given transaction in Poland according to the domestic VAT rate of 23%.

Example 4.

Mr. Roman is not an active VAT taxpayer. In July, it purchased advertising services from a Swiss contractor. So how should he settle a given transaction?

Mr. Roman should tax the purchased service in Poland at the domestic VAT rate of 23% and report the VAT due. After paying VAT, he will have the right to include it in the KPIR in column 13 - other expenses.

Example 5.

XYZ purchased a license from a US company. The contractor also has a branch of the company in Poland. Should such a transaction be reported as an import of services from outside the EU?

Whether a given transaction should be accounted for as an import of services depends on whether the Polish branch participated in the sale of a given license:

if so - then the transaction should be accounted for as domestic, without showing the import of services,
if not - then the transaction should be accounted for as import of services from outside the EU.

JPK_V7 in the case of active VAT payers or VAT-9M in the case of VAT exempt taxpayers (if you do not already submit VAT-8) should be submitted to the competent tax office (due to the taxpayer's place of residence) by the 25th day of the month following the arising of the tax obligation.

Before including the import of services in the sales and purchase VAT register and in the VAT declaration, it should be converted into PLN. When converting the import of services from outside the EU from a foreign currency to PLN, the average exchange rate of the National Bank of Poland from the last business day preceding the day when the tax obligation arises should be used.

This position was also adopted by the Director of the Tax Chamber in Warsaw, in the individual interpretation of February 25, 2013 (ref. IPPP3 / 443-1179 / 12-3 / KC) If the amounts used to determine the tax base are specified in a foreign currency, 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 date on which the tax obligation arises (Article 31a (1) of the VAT Act. ).

The tax obligation should be recognized at the time of payment of the advance (Art. 19 (19b) and (11) of the VAT Act), therefore, in connection with the above and the wording of the law in Art. 31a paragraph. 1 of the VAT Act, a foreign currency should be converted from foreign invoices into zlotys (PLN) according to the average exchange rate of the National Bank of Poland for a given foreign currency on the day preceding the advance payment, i.e. on the day preceding the day when the tax obligation arises.

Example 6.

Ms Anna purchased the service from a US contractor. She received the invoice for the purchase on January 17, 2020, but the service was performed on January 15, 2020. What exchange rate should Anna convert the received invoice?

For the conversion, Ms Anna should use the NBP exchange rate from the day preceding the date of the service, i.e. January 14, 2020.

To sum up, when importing services from outside the EU, the most important thing is to determine the place of service provision, convert the value of the operation into zlotys at the appropriate exchange rate and settle it in your tax office within the applicable deadline.