By Dr Robert Lewandowski, attorney at law (radca prawny) at Derra, Meyer & Partners in Warsaw
The Polish legislator has introduced new amendments to the Value Added Tax Act (“VATA”) as of 1st January 2017 in Poland regarding the taxation of construction services. These services are now subject to the so–called VAT reverse charge system according to which a service performer does not charge VAT due to the fact that the settlement of the tax lies with the purchaser of these services. The reverse charge system is applicable under the occurrence of the following circumstances:
(i) The acquired services are one of the construction services set forth in Annex14 of VATA,
(ii) The entity performing services is registered as a VAT taxpayer and is not exempt from paying VAT and acts as an subcontractor within construction work,
(iii) The contractor, as the purchaser of the aforementioned services is also an entity registered as a VAT tax payer.
Pursuant to the new amendments to the VATA, subcontractors shall issue their VAT invoices without imposing VAT on the purchaser of these services and each subcontractor’s VAT invoice shall refer to the application of the VAT reverse charge system. The new regulation may or may not have an adverse effect on the financial situation of subcontractors and this issue will depend on the terms and the amount of the remuneration of the subcontractors agreed with their contractors. The subcontractors often buy building materials on which a VAT is imposed by the sellers. At the same time, they will receive payments form contractors without VAT according to the new VAT reverse charge system. This can lead to the situation in which the subcontractor may be encumbered (due to the pre-VAT payment on building material) as the time limit for a VAT refund is 60 days and this deadline may be extended by the tax authorities. This negative impact may be avoided if the subcontractors will be able to include the pre-paid VAT in their remuneration in subcontracts or agree on down payments for work to be provided for their contractors to improve their financial fluency. Probably only practice will show how subcontractors will handle the new rules.
0+
