Re-invoicing of services to a foreign contractor

Polish entrepreneurs very often use the re-invoicing institution when dealing with foreign contractors. As practice shows, re-invoicing services to a foreign contractor for services purchased in Poland causes considerable problems for entrepreneurs.

Re-invoicing of services consists in invoicing by one entity to another entity for resale of services without adding a margin. Its purpose is to transfer the costs by the re-invoicing entity to the entity that actually uses the services. The re-invoice is therefore a normal invoice, but issued by an intermediary between the relevant service provider and the actual buyer of the service.

Regulations on re-invoicing are also included in the VAT Act in Art. 8 sec. 2a. According to them, when a taxpayer, acting in his own name but for the benefit of a third party, participates in the provision of services, it is assumed that the taxpayer has received and provided these services himself. This means that the entity re-invoicing a given service purchased in its own name, but for a third party, is first treated as a customer and then as a service provider of the same service. Therefore, the taxpayer participating in the resale of the service issues invoices for the service provider documenting the provision of this service without taking into account the margin.

In practice, this means that a Polish taxpayer, when re-invoicing services to a foreign contractor, should behave as if he had provided the service himself. For this purpose, it should also determine the appropriate place of benefit (taxation) and the rate.

As a consequence, re-invoicing:

• is associated with VAT taxation in Poland, if the place of delivery of the resold goods or the place of providing the resold service is located in Poland; in this case, the issued re-invoice should contain the tax rate appropriate for the resold goods or service,

• does not involve VAT in Poland, if the place of delivery of the resold goods or the place of providing the resold service is not located in Poland; in this case, the issued re-invoice should be a simplified invoice, i.e. an invoice without the tax rate and amount and the amount due together with the tax.

Below we present the most common services re-invoiced to a foreign contractor.

Re-invoicing of hotel services

In the case of real estate services, a special regulation will apply regarding the determination of the place of performance.

Pursuant to Art. 28e of the VAT Act, the place where real estate services are provided, including:

• services provided by appraisers,

• services provided by real estate agents,

• accommodation services in hotels or establishments with a similar function, such as holiday centers or places intended for use as campsites,

• real estate use and use services,

• construction preparation and coordination services, such as architects and construction supervision services

- is the location of the property.

Such regulations mean that if a hotel is located in Poland, the domestic VAT rate should be used in the invoice issued to a foreign contractor, i.e. the same rate as indicated in the original invoice issued by the hotel. Such a position was confirmed by the Director of the Tax Chamber in Warsaw, in a letter of 23 June 2008, No.IPPP1-443-901 / 08-4 / MP, which reads:

Hotel services are undoubtedly real estate services. For this type of service, the place of supply is the location of the property. If the place of providing hotel services is the territory of Poland, then, when re-invoicing the services in question to clients, the tax due at the tax rate applicable in the country must be shown.

(...) In the case of hotel services, the place of provision of which is located outside Poland, the tax settlement of the services in question is carried out according to the rules applicable in the country of the place of provision.

Re-invoicing of passenger transport services to a foreign taxpayer

The place of provision of passenger transport services is at the place where the transport takes place, taking into account the distances covered (Article 28f (1) of the VAT Act).

Therefore, it should be recognized that the resale of passenger transport services in Poland is subject to VAT in Poland, and therefore should be documented with invoices with input Polish VAT. On the other hand, the resale of passenger transport services outside Poland is not subject to VAT in Poland, and therefore should be documented with simplified invoices.

On the other hand, the place of provision (resale) of international passenger transport services by sea or air transport is entirely within the territory of Poland (§ 3 point 1 of the Regulation of the Minister of Finance of December 16, 2013 on the place of providing services and refunding the amount of input tax charged to the entity performing purchase (import) of goods or services). As a consequence, the resale of airline and sea tickets on routes to and from Poland is subject to VAT in Poland, so it should be documented with "domestic" invoices with a 0% rate. The condition for applying the 0% rate is the possession of an international air, ferry or ship ticket (Article 83 (1) (23) in conjunction with Article 83 (3) (4) of the VAT Act).