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Records required to apply the VAT rate of 0% to intra-Community supplies

Records required to apply the VAT rate of 0%

As of 1 January 2020, certain amendments to regulations influenced by EU law will become effective with regard to international transactions. The purpose of the changes is to make VAT accounting easier for taxpayers. The changes will include the requirements for documenting intra-Community transactions for the purposes of zero-rated supplies.

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Records required to apply the VAT rate of 0% to intra-Community supplies

The question of how intra-Community transactions should be documented has always been a source of practical problems. One of the main requirements for eligibility to charge VAT at the rate of 0% in the case of intra-Community supplies is for the taxable person to be in possession of documents confirming that the taxable goods have been transported from one member state and delivered to an acquirer in another member state. The Polish VAT regulations, specifically the provision of section 42(3) of the VAT Act, define such documents to include shipping documents that clearly show the goods have been delivered to their destination in an EU member state, and a packing list. The VAT Act also contains a list of supporting documents that may be used as evidence if the shipping documents and the packing list do not confirm clearly the delivery of the goods to an acquirer in another EU member state (Section 42(11) of the VAT Act). 

In the past, tax authorities have argued that a CMR document (particularly if it is signed by the consignee in section 24) is essential for eligibility to apply the rate of 0% and that where such a document is not available, even if alternative documents prove that the goods have been delivered to a destination outside the territory of Poland, the rate of 0% must not be applied. That was helped by the Supreme Administrative Court's resolution of 11 October 2010 (I FPS 1/10). The Court said that for a taxable person to be eligible to apply the rate of 0% to an intra-Community supply of goods, it is sufficient for that person to be in possession of only some of the documents specified in Section 42(3) of the VAT Act, supported by the documents specified in Section 42(11) of the VAT Act and/or or any other documents if all of them confirm that the goods have been transported from Poland and delivered to an acquirer based in another EU member state. Based on that resolution, it has become a practice that the unavailability of a CMR document (or, if available, a CMR document not signed in section 24, but supported by other documents) does not automatically mean problems with charging VAT at the rate of 0% in the case of intra-Community supplies.

Given the EU-level changes regarding the documentation of intra-Community supplies, where one of the documents required for eligibility to charge VAT at the rate of 0% is a signed CMR document, it is worth considering whether the established practices based on decisions of Polish courts confirming that eligibility to apply the rate of 0% to intra-Community supplies may be based on other documents will continue to be respected by tax authorities.

The new provisions on the documentation of intra-Community supplies are based on Council Implementing Regulation (EU) 2018/1912 of 4 December 2018 amending Implementing Regulation (EU) No 282/2011 as regards certain exemptions for intra-Community transactions ("Regulation"). The provisions of the Regulation do not require the enactment of a statute to apply in Poland, as these provisions are directly applicable.

According to the Regulation, an exemption (the rate of 0% in Poland) for intra-Community supplies may be applied on the presumption that the goods have been transported from one EU member state to another. The Regulation focuses on documents issued by parties other than the acquirer and the vendor. The new provisions require that documents that may be the basis for the presumption be issued by two different parties that are independent of each other, of the vendor and of the acquirer. Therefore, transport and logistics companies will play a major role in ensuring compliance with the requirements of the presumption. The presumption will, however, not apply if the vendor or the acquirer transport the goods using their own means of transport (i.e. the requirements for the presumption will not be met).

For example, the presumption will apply if the taxable person is able to prove that the goods have been transported to another EU member state using two documents, such as a CMR document signed in section 24 and a bank document confirming the payment for the transport of the goods. See Box 1 and Box 2.

Box 1

If the transport service is ordered by the vendor

  • The vendor must prove that the goods have been dispatched or transported by the vendor or a third party for the vendor, and
  • the vendor is presumed to be in possession of at least two consistent documents from Group A or one document from Group A and one from Group B, issued by two different parties that are independent of each other, of the vendor and of the acquirer.

If the transport service is ordered by the acquirer

  • The vendor is presumed to be in possession of a written statement from the acquirer, stating that the goods have been dispatched or transported by the acquirer, or by a third party on behalf of the acquirer, and identifying the member state of destination of the goods, and
  • the vendor is presumed to be in possession of at least two consistent documents from Group A or one document from Group A and one from Group B, issued by two different parties that are independent of each other, of the vendor and of the acquirer.
Box 2

Group A

  • Documents relating to the dispatch or transport of the goods, such as
    • a signed CMR document,
    • a bill of lading,
    • an invoice for the carriage of the goods by air or an invoice issued by a goods carrier.

Group B

  • an insurance policy with regard to the dispatch or transport of the goods, or bank documents proving payment for the dispatch or transport of the goods;
  • official documents issued by a public authority, such as a notary, confirming the arrival of the goods in the EU member state of destination;
  • a receipt issued by a warehouse keeper in the EU member state of destination, confirming the storage of the goods in that member state. 

If the requirements for the presumption are met, the taxable person will have the certainty that they may lawfully apply the rate of 0% to their supplies. The burden of proving that the goods have not been transported from one EU member state to another, to rebut the presumption, will rest on the relevant tax authority.

What is important is that the new EU provisions introducing the presumption do not mean that the transport of the goods may not be proved under the applicable provisions of domestic law.

This is confirmed by the reasons for the amendments to the VAT Act. The document with the reasons reads that "failure to meet the presumption requirements does not automatically mean that the rate of 0% will not apply. In such a case, the vendor has an obligation to prove otherwise, in accordance with the VAT Act, that the requirements for eligibility to apply the rate of 0% are met."

If the requirements for the presumption are met, the taxable person will have the certainty that they may lawfully apply the rate of 0% to their supplies. The burden of proving that the goods have not been transported from one EU member state to another, to rebut the presumption, will rest on the relevant tax authority.

What is important is that the new EU provisions introducing the presumption do not mean that the transport of the goods may not be proved under the applicable provisions of domestic law.

This is confirmed by the reasons for the amendments to the VAT Act. The document with the reasons reads that "failure to meet the presumption requirements does not automatically mean that the rate of 0% will not apply. In such a case, the vendor has an obligation to prove otherwise, in accordance with the VAT Act, that the requirements for eligibility to apply the rate of 0% are met."

The same view is expressed in the draft Explanatory Notes of the European Commission (Explanatory Notes on 2020 Quick Fixes”, GFV No. 89).

Consequently, the new EU provisions should not affect the scope of documents required by Polish tax authorities as evidence of the taxable person's eligibility to apply the rate of 0% in the case of intra-Community supplies. It would, however, be advisable for the taxable person to review their records in terms of whether thy meet the Polish statutory requirements, particularly if the records do not include a signed CMR document. This is because tax authorities may adopt a more restrictive approach in this regard.

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The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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