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It often happens that goods of a Polish or foreign entrepreneur are delivered to a warehouse located in Poland, and from there the further sales (including foreign sales) are planned. Sales to private individuals from Poland abroad (B2C) are so-called distant sale to a person who is not a VAT payer. In this situation some entrepreneurs wonder when VAT shall be paid in Poland and under what circumstances in the destination country. This question is important because possible omissions in this respect may lead to liability for non-payment of the tax due. Entrepreneurs should also think about the documents used to confirm payment of VAT due abroad in order to avoid additional taxation in Poland.

Distant sale from Poland to another EU country and VAT

Distant sale from Poland is sale of goods transported from this country to a natural person (private individual) from another EU country that is not a VAT payer. Such a situation occurs when goods are delivered from a warehouse in Poland to a private person, for example to Germany.

A trader providing the above-mentioned services should remember that distant sale from Poland is taxable in Poland if:

(1) the net threshold for distant sale to the EU country concerned has not been exceeded and in this case additionally;

(2) no notification has been submitted to the Head of the Tax Office in Poland of the voluntary taxation of these sales in the EU country of destination of the goods dispatched despite not exceeding the threshold.

Exceeding the threshold or submitting an appropriate notification results in taxation of this sale in the EU country of destination of the goods.

How to check whether the threshold value has been exceeded?

Each EU country sets its own threshold for distant sale between € 35,000 and € 100,000 (e.g. Germany € 100,000, Austria € 35,000). The threshold refers to the value of net sales by distant sale to the EU country concerned made in a given calendar year. The threshold expressed in a foreign currency is converted in Poland according to the exchange rate announced by the National Bank of Poland on 01.05.2004.

For example, the limit for distant sale from Poland to Germany according to the EUR/PLN exchange rate of 4.8122 PLN as of 30.04.2004 is 481,000 PLN (rounded up to 1,000 PLN).

When will distant sale be taxed in Poland?

The distant sale from Poland to an EU country will be taxed in Poland until the distant sale threshold set for that EU country is exceeded (unless an applicable notice is submitted). Once the threshold is exceeded, the distant sale will be taxed in the EU country of destination. This also applies to sales to that EU country in the year following the year in which the threshold was exceeded, even if the threshold was not exceeded in that following year.

For example, if in July 2018, distant sale from Poland to Germany exceeded the limit of PLN 481,000, so part of the distant sale from Poland to Germany in 2018 and all distant sale from Poland to Germany in 2019 is taxed in Germany. If this threshold is not exceeded in 2019, from 01.01.2020 the distant sale from Poland to Germany are again subject to taxation in Poland.

Do not forget about the documentation

It should be noted that despite exceeding the threshold of a given EU country, the taxpayer must have appropriate documentation to avoid additional taxation of these sales in Poland. In this case, it is the documentation that clearly confirms that the goods have been delivered to the buyer, who is in the EU country of destination of the dispatched goods. The above-mentioned documents can be very important for a possible control. It should also be remembered that after several years, when the entrepreneur does not remember the details of the sale, the authorities may ask for details of the transaction.

The changes in 2021

It should be noted that amendments to the law are planned for 2021, which will modify the existing regulations for the distant sale business. We will therefore keep you informed about the changes and new regulations. Knowledge of the legal environment enables effective management of the business conducted, which in the context of the uncertainty on the market is of considerable importance for the conduct of business.

If you already have questions regarding distant sales, please contact us. After we have familiarized ourselves with the individual situation, we will explain any doubts and try to find effective solutions tailored to the needs of the company. 

The distance sales of goods concern the supply of goods to a private individual (B2C), where the goods are dispatched or transported from one Member State to another. An example of such situation is the sale of goods from a warehouse located in Poland to a private individual in Germany. The distance sale from Poland is currently taxable in the Member State of dispatch of the goods, unless this sale exceeds the distance sales limit to the country of destination or a declaration to the tax office for voluntary taxation in that country was submitted. These rules will change in 2021.

One VAT return for EU-wide sales

The new rules set a resignation of the application of the limits for distance sales and the new rules set a general rule that the distance sales are taxable in the country to which the goods are dispatched, i.e. the country of consumption. According to the planned changes, the distance sales (referred to in the Directive as intra-Community distance sales of goods) will be settled in a special way, i.e. through the VAT-OSS system. The seller will submit a special VAT return through this system to the tax authorities competent for its company seat (applies to EU-based sellers). 

In this VAT return, the taxpayer will settle among other the intra-community distance sales of goods made throughout the EU, stating the net value, VAT rate, VAT due with division into individual countries of consumption. This VAT return will be submitted once a quarter to the end of the month following the given quarter. VAT due amount on these sales will be paid by the deadline for submitting a new VAT return to one bank account.

Entities covered by the new rules

Changes shall include entities which conduct the distance sales from one Member State to individuals in a Member State other than that in which the seller is established or has a place of business. An example would be a selling goods company based in Germany, which sends products from a warehouse in Poland to an individual in Austria.

The new rules will apply on a mandatory basis to companies whose net turnover in the current or previous calendar year exceeded EUR 10 000 for intra-Community distance sales of goods or services. Other entities with a lower turnover may voluntarily decide to apply a specific method of settlement of such sales.

It is also likely that the special VAT-OSS scheme will be available to entities conducting a distance sales from one Member State to individuals in another Member State where the seller is established. An example is a company established in Germany selling goods from a warehouse in Poland to an individual in Germany.

The new rules will enter into force in 2021

The new rules of taxation of distance sales are to be amended by EU Council Directive 2017/2455 of 5 December 2017 and EU Council Directive 2019/1995 of 21 November 2019. These acts were originally intended to apply from 01 January 2021. In accordance with the decision of the EU Council of 20 July 2020, this date was postponed to 01 July 2021.

Benefits for entrepreneurs

These changes introduce a number of simplifications for cross-border distance sales B2C of goods. In connection with these sales, the taxpayers will not have to register for VAT purposes in every country of consumption or country from which the goods are dispatched. This does not change the fact that the obligation to register for VAT purposes may arise as a result of other taxable transactions in a Member State, such as intra-Community transfers of goods.

It is already worth planning the possible benefits of the new regulations and planning a strategy to help develop the business. Our VAT specialists are willing to prepare your business for the revolutionary changes in VAT regarding the cross-border distance sales.

The Ministry of Finance announced the introduction of the first VAT simplification package - SLIM VAT (simple, local and modern). The planned changes concern four areas: invoicing, export, exchange rates, financial benefits. Entrepreneurs should already be informed about the changes and their consequences for their business.

Invoicing

Clearly, the new rules will make it easier for taxpayers to settle a correcting invoice in the minus. Under SLIM VAT, the condition of obtaining confirmation of an in-minus correction invoice from the client will be removed. As a result, the taxpayer will be able to reduce the tax base already in the period of issuing the correcting invoice.

There will also be added provisions regulating the method of accounting for the in plus correction invoices, which were lacking so far. This has led to great uncertainty for taxpayers as to the correctness of settlements. Correction invoices in plus will be recognized in settlements in the month of issue.

Export

For the application of the 0% rate, the deadline for export of goods will be extended from 2 to 6 months from the date of receiving the advance payment. This is to solve the problem of long-term supplies. This regulation will particularly benefit those companies whose business is based on exporting goods to foreign markets.

Exchange rates

Thanks to the VAT Simplification Package, the taxpayer will be able to apply the exchange rate applicable to the conversion of revenue into income tax also for VAT purposes. Therefore, it will be possible to use the same exchange rate for one transaction.  

Financial Benefits

Entrepreneurs can also count on additional financial benefits. Among them one may point out:

• extension of the deadline for VAT deduction from invoices to four monthly settlement periods;
• the possibility to deduct VAT from invoices for accommodation services purchased for resale;
• increase of the limit for not registering gifts of small value from 10 to 20 PLN. 

Summary

The proposed simplifications are to enter into force in early 2021. As announced by the Ministry of Finance, it is the beginning of a gradual process of simplifying the procedure for taxpayers and removing burdensome and time-consuming formal obligations. The project has been prepared in cooperation with entrepreneurs in order to adapt the regulations to the needs of companies as much as possible. Further proposals for simplification should be presented at the end of this year.

The legal changes, even those acting for the benefit of the taxpayer, generate the need to modify the existing intra-company procedures. Appropriate preparation of a company for SLIM VAT will allow to maximize profits related to time and financial resources saved.

We will be happy to answer any questions you may have in this respect in order to make it easier for you to adapt your daily practice to the current regulations.

Since 1 July 2020, new rules on chain transaction taxation have been in force in Poland in connection with Council Directive (EU) 2018/1910 of 4 December 2018. The new rules are aimed at harmonising the settlement of chain transactions across the EU.

The assumptions of a chain transaction are fulfilled if:

(1) the transaction involves at least 3 entities and;
(2) the good is sold by the first seller to the intermediary operator who sells it to the last transaction participant in the chain and;
(3) the good is shipped (transported) directly from the first supplier to the last consumer.

Within the supply chain, only one international transaction can be exempted from VAT (in Poland taxed at 0 %). The others will be taxed with the applicable national tax.

Under the new rules, the first sale is exempt unless the intermediary operator in the chain provides the first seller with the VAT number assigned in the country where the dispatch of the goods begins (i.e. the country of the first VAT taxpayer) – in this case the second sale is exempt.

The above new provisions do not apply to trade with non-EU countries, in relation to which the circumstances of the transaction still need to be examined.

Due to the new regulations we recommend that you verify the chain transactions. In case of doubt, please contact our VAT specialists.

On 1st July, the regulations implementing the provisions of the EU Directive 2018/1910 (the so-called quick fixes package) concerning, among others, the sale of goods using the call-of-stock procedure entered into force. The mentioned directive unified the regulations of EU countries, among other things, with regard to the rules of taxation of supply of goods to other EU countries. Thanks to the new regulations, companies moving products from one EU country to another for later sale will avoid the obligation to additionally register as VAT payers in the country of destination of goods.

Facilitation for some businesses

Transactions between EU countries are the basis of operations of many companies. However, sales do not always precede the transport of products between countries. It happens that supplier A (a VAT payer in the EU) moves goods to (known at the time of the move) buyer B in another EU country, but the actual sale takes place later. So far, in this situation, supplier A should, as a rule, register for VAT in the country of destination of the goods, report the intra-Community acquisition of his own goods there and then the domestic sale to buyer B. The new regulations will allow for the use of the call-of-stock procedure, which will significantly simplify the process.

Call-of-stock procedure?

Using the call-of-stock procedure avoids the need to register for VAT in the country of destination. Only when the right to dispose of the goods as owner to purchaser B is transferred, supplier A report an intra-Community supply of goods to purchaser B. In contrast, purchaser B recognises the intra-Community acquisition of goods.

Formal call-of-stock requirements for the supply of goods to Poland

This simplification may be applied if the following conditions are met:

• the goods are moved by a VAT taxpayer from the territory of a Member State other than Poland for supply at a later stage;

• the goods are supplied to another taxpayer who is entitled to acquire ownership of the goods in accordance with the agreement in force between the two taxpayers;

• the supplier sending the goods has no registered office or fixed establishment in Poland;

• the person acquiring the goods is registered for EU VAT and his name (or first name and name) and tax ID (preceded by PL code) are known to the supplier at the time the movement of the goods began;

• the supplier shall record the movement of the goods in a special register kept for the purpose of moving the goods under the call-of-stock procedure and shall report in the information corresponding to the VAT-EU recapitulative statement in the country of dispatch of the goods;

• the transfer of the right to dispose of the goods as the owner will pass on to the purchaser of the goods within 12 months from the date of entry of the goods into the call-of-stock procedure.

Change of purchaser after transporting the goods

The simplified procedure can also be applied in the case of a change of purchaser. The change may take place within 12 months after the goods are moved to Poland. The new purchaser must be registered for EU VAT. The supplier must know the name (or first and last name) and tax ID of the new purchaser at the time of replacement. The supplier must also report the change in the information corresponding to the summary information in the country of shipment of goods and register the change in the special register of movement of goods kept by him under the call-of-stock procedure.

No sale of goods

In practice, it happens that the shipped goods finally will not be sold in the country of destination and will be moved back to the country of dispatch. If the re-dispatch takes place within 12 months of entry into the call-of-stock procedure, there is no intra-Community movement of own goods. However, the supplier shall be obliged to include the return of the goods in his records of movements under the call-of-stock procedure.

Summary

It is clear from the above analysis that companies will be able to benefit from simplifications, but this requires the development of new procedures and documentation. Only the appropriate preparation of internal rules for conducting transactions with the use of call-of-stock procedure  will enable effective use of the possibilities offered by Directive 2018/1910. Properly implemented procedures will also avoid potential mistakes.

In connection with the introduced changes, we recommend you to analyse your transaction model and contact our specialists. We will help you to analyse the possibilities of using the above simplifications and prepare appropriate documentation.

In February 2017, on the initiative of the Polish-German Wind Energy Circle, a meeting of investors with a total investment volume in the Polish wind energy sector of over 2 billion euros was held. In a gloomy mood, the Polish government's activities in the field of renewable energy and possible countermeasures were then discussed. This was only one of many seminars of this type during which GPWEC presented and discussed the legal situation in Poland and alternative investment opportunities in the energy sector.

At the time, none of the participants expected that Deputy Prime Minister Jadwiga Emilewicz, Minister of Energy in the Law and Justice government, would announce that Poland 'would be the country with the highest number of new investments in renewable energies by 2050'. In 2016, this was even unthinkable, but such a statement was made, as can be seen from the media reports: https://www.money.pl/gospodarka/pis-przeprasza-sie-z-wiatrem-emilewicz-chce-zasilic-polske-pradem-z-oze-6537287472191105a.html

The few courageous investors who saw an opportunity to buy wind turbines cheaply in the deepest crisis in Poland in 2016/2017, when the property tax on wind turbines quadrupled in addition to the 10H regulation, were right, because it was no longer profitable for anyone to produce wind energy in Poland. These investors are now best positioned in Poland.

Now, with the planned modification of the 10H regulation, the political obstacles will be removed and the further development of wind energy in Poland can be supported unhindered. For  the GPWEC this means that we can now resume our normal work:  To inform, network and support the wind energy stakeholders in Poland and Germany.

GPWEC would like to thank all the members and supporters of the Club for the support they have received so far for the development of Polish wind energy, which undoubtedly had a positive impact on the lobbying work of the Club. Thanks to this, investors from the wind energy sector were able to agree among themselves on their plans and perspectives and thus were encouraged to continue their investments in Poland.

GPWEC is planning a regulars' table in September this year for networking and a seminar on PPA models in Poland for our general meeting on the 19th of November 2020. Concrete invitations will follow.

On 22^nd September 2020 at 10:30 a.m. Mr. Henning von Zanthier will hold a presentation about legal requirements for Foreign Direct Investments (FDI) in Germany for Malaysian business lawyers during the webinar „COVID-19 – An Issue of the Legal Profession“, organised by German Federal Bar Association (BRAK). Following subjects, among others, are going to be discussed: access to justice during COVID-19 crisis and the rising importance of mediation during and after COVID-19 crisis. Participation is possible after prior registration at domaschke@.brak.de.  

Program of the webinar

On 24^th September 2020 from 8:30 a.m. to 10 a.m. Mr. Henning von Zanthier will moderate the webinar „New Obstacles to Foreign Direct Investments?“ – as part of the annual LAWASIA conference. Speakers from Japan, Switzerland, Thailand, the Philippines, the Czech Republic and Bangladesh will share their experiences on their Foreign Direct Investments (FDI) rules. The webinar can be attended free of charge after prior registration.

The transfer pricing regulations in force since January 2019 have introduced numerous changes in this respect, such as for example:

• new documentation thresholds,
• the obligation for related entities to submit information on transfer prices TPR-C (legal persons) or TPR-P (natural persons) to the Head of the National Fiscal Administration,
• an obligation to make a statement confirming that the transfer pricing documentation has been prepared and that the transactions are carried out on arm’s length principle.

Taxpayers must therefore pay particular attention to the new regulations, while keeping in mind the statutory deadlines in this respect. These deadlines have been extended for most taxpayers due to the coronavirus pandemic and will expire on 31 December 2020.

Deadline for submitting of TPR-C lub TPR-P in the year 2020

The deadline for submitting this information TPR-C (TPR-P) and statements is generally passed for entities whose tax year is consistent with the calendar year of the day 30 September 2020 (in connection with the COVID-19 pandemic, the deadline was extended to 31 December 2020) For failure to comply with the deadlines for the performance of the obligations or for the certification in the submitted documents an untruth, the legislature provided for severe penalties. For this reason, it is important not only to complete the formalities within a certain period of time, but also to prepare the required documentation reliably.

Preparing the required data can be time consuming

According to the explanatory memorandum to the Act introducing the above mentioned obligations, the purpose of the introduced regulations is to obtain by the Head of the National Fiscal Administration detailed information on the conditions of controlled transactions concluded by taxpayers obliged to prepare local transfer pricing documentation. The collected data is to be used for statistical and economic analyses and analysis of the risk of income underestimation by taxpayers through non-market behaviour.

Additionally, it should be pointed out that the key element of information TPR is to properly supplement information on:

• the realized result on the transaction,
• data from prepared benchmark analysis,
• values of indicators such as achieved operating margin, gross profit margin, profitability of assets or profitability of equity.

Do not hesitate to prepare transfer pricing documentation

Taking into account the above, in order to meet the transfer pricing obligations imposed by the legislator in a timely and reliable manner, we suggest taking appropriate steps now. Taxpayers have gained additional time to complete the formalities, however, this does not mean that they can postpone the above topic to the last moment. Identifying transactions and then preparing the necessary documents and completing the formalities in accordance with the new regulations may prove to be time consuming.

On 15^th September 2020 from 11:25 a.m. attorney at law, Mr. Kamil Niciecki from VON ZANTHIER & SCHULZ in Berlin will give in Polish an introduction to the business activities of Polish companies in Germany during the webinar "Chances for Polish companies in the German capital region - European double city Frankfurt (Oder) and Słubice", explaining the German sale contract, the contract for work and services and the foundation of limited liability company (GmbH) in Germany. Before that, important economic data for Polish companies in Germany will be explained by the Investor Center Ostbrandenburg (ICOB), Mrs. Kania. The webinar is organized by ICOB in cooperation with the German-Polish Business Circle (DWK) from Poznań and starts at 11 a.m. The webinar is free and open for everyone after prior registration at adamus@.icob.de.

Program of the webinar