Consequences of not showing the import of services - the most important information
Entrepreneurs importing services are required to report VAT both on the side of the output tax and the tax charged on the invoice received. However, the question arises whether it is necessary to show such an invoice and what are the consequences of not showing the import of services. Check, you will find the answer in our article!
When does the import of services occur?
In order to recognize a purchase transaction as an import of services, it is necessary to meet a total of 4 conditions:
the place of provision of services within the meaning of the VAT Act is the territory of Poland,
the service provider has its seat, place of residence or stay outside the territory of Poland,
the service recipient is a legal person, a natural person with a seat or place of residence or stay in the territory of Poland or an organizational unit without legal personality and are obliged to settle accounts with the Polish tax office,
the service is provided against payment.
Pursuant to Art. 2 point 9 of the VAT Act, import of services is understood as the provision of services for the performance of which the taxpayer is the recipient of services referred to in art. 17 sec. 1 point 4.
Therefore, in most cases, the obligation to settle VAT will be on the part of the buyer of the service.
Import of services - an active VAT payer
The correct determination of the moment when the tax obligation for the import of services arises is very important, because it is determined by:
when should the import of services be included in the VAT register,
in which declaration to show it,
when the right to deduct the VAT due on the import of services (which is also the input tax) arises
When determining the date of the tax obligation arising from the import of services by the buyer of services, the same principles should be followed as when determining the moment of providing a service in Poland by domestic entities.
Thus, in the case of an import of services, the tax obligation arises in principle when the service is provided or if the customer has transferred all or part of the payment before that date - at the time of transfer of the payment in relation to the part of the remuneration paid.
The taxpayer importing services is obliged to tax the transaction at the national VAT rate and present it in the VAT-7 (monthly settlement) or VAT-7K (quarterly settlement) declaration. Imports of services are not included in the EU-VAT return. The obligation to settle VAT on the import of services, as a rule, rests with the buyer of the service.
Import of services - taxpayer exempt from VAT
With regard to the import of services, VAT exemptions are not recognized. Taxpayers who are entitled to VAT exemption as part of domestic transactions in relation to the import of services cannot benefit from it, therefore they are also required to show the import of services on the VAT-9M form. The tax must additionally be settled within 25 days from the date of the tax obligation.
VAT paid by taxpayers exempt from VAT can be included in costs on the date of its payment. The paid VAT should be classified under column 13 of the KPiR as other expenses related to the activity.
Exchange rate to convert the currency into PLN
In the case of import of services, the taxpayer should use the average NBP exchange rate from the business day preceding the date of the tax obligation.
Consequences of not showing the import of services
In many cases, taxpayers do not know how to prove the import of services or show it incorrectly, e.g. in the wrong settlement period, not realizing that incorrectly showing or not showing the import of services involves penal and fiscal consequences, if such an irregularity were to be found. found during the inspection.
Reduction of output tax in the case of import of services in accordance with Art. 86 sec. 10b of the VAT Act is possible in the declaration in which the tax should be shown.
In a situation where the import of services is not shown or is proved incorrectly and this fact is detected during the fiscal inspection, a decision may be issued that only the output VAT will be subject to reporting, without the possibility of deducting input tax. It is possible to reduce the output VAT by input VAT if the import of services is correctly and timely shown.
Thus, in the event of failure to show the import of services, a tax arrears may arise and the need to pay output VAT without the possibility of reducing its amount by input tax. The payment of the amount due should be paid together with interest for late payment.
In order to avoid criminal consequences, if you do not show the import of services or show it in the wrong amount, it is worth correcting these errors yourself. Correction is understood as submitting a correction of the VAT-7 declaration and showing the input and output VAT related to the import of services.
Correcting the declaration independently (before the tax inspection) does not cause any negative effects. In such a situation, no tax arrears arise, as the transactions of importing services are shown both on the side of output and input tax.
The obligation to report import of services rests on Polish taxpayers also when the imported services are exempt from tax (e.g. financial or insurance services). In such a case, the tax due on import is not charged, but the taxpayers are still obliged to include the imported services in the appropriate items of the VAT declaration.