A practical guide to e-commerce VAT - part 1
On July 1, 2021 a number of changes relating to e-commerce were introduced to the Value Added Tax Act as part of the so-called VAT e-Commerce Package.The objective of the new regulations is to tighten the VAT system in the e-commerce sector.The solutions adopted provide for new institutions and rules for making VAT settlements on international trade activities, in particular between Polish businesses performing cross-border supplies of goods and providing cross-border services to EU customers, the so-called B2C (business-to-customer) activity.
The changes may are new to Polish businesses and raise doubts as to their appropriate application. Thus, the Ministry of Finance on September 1, 2021 issued binding tax explanations providing a practical guide on the main principles of e-commerce VAT.
The tax explanations provide an analysis of the most important issues in terms of:
1) WSTO – intra-Community distance sales of goods
- The WSTO corresponds to the repealed institutions for distance selling from and in the country which were in force before the introduction of the e-commerce VAT package,
- The precondition is the participation of the supplier (whether directly or indirectly) in the transport or dispatch of goods,
- The place of delivery is as a matter of principle the Member State in which the transport or dispatch of goods ends.
- The threshold determining the place of taxation has been decreased to the amount of EUR 10 000 (PLN 42 000),
- The taxpayer has the option of choosing to have the e-commerce transactions taxed in the country of consumption, even if the limit set (EUR 10 000) is not exceeded. However, the change in the place of taxation will apply to all supplies, in particular to supplies made in the territory of other Member States,
- The tax obligation arises under the internal regulations of the country in which the transaction is taxed,
- It is essential to obtain documents confirming the delivery of goods in the territory of another Member State. Failure to obtain appropriate documentation within the deadline for submission of the VAT return for the current or the next settlement period, results in the obligation to recognise the supply of goods at the relevant VAT rate,
- The obligation to issue invoices depends on whether the business benefits from the EU OSS (One Stop Shop) procedure and enjoys an exemption from the obligation to issue VAT invoices, or does not benefit from EU OSS procedure and is required to issue a VAT invoice.
- WSTO taxed in Poland constitutes a delivery of goods for reporting purposes in JPK_V7 (SAF-T) file.
2) PLATFORM – electronic interface
- Electronic interface refers to any device or software enabling to establish a contact between a seller and a user conducting the purchase, e.g. portals, web sites, platforms and application software interfaces (APIs).
- The platform only applies to certain types of B2C deliveries, i.e. SOTI, WSTO and delivery of goods within the EU.
- The platform can be considered as a supplier and obliged to act as a VAT payer, ergo to settle VAT and other obligations.
- Transferring liability for VAT obligations on certain supplies to taxable persons engaged in the business of owning, operating or managing electronic interfaces, irrespective of whether the place of establishment (permanent establishment) is located within the EU or in a third country.
- The tax obligation arises at the moment of acceptance of the payment, i.e. when the supplier selling the goods by the electronic interface receives a payment confirmation, a payment authorisation message or an undertaking from the purchaser to make the payment, whichever comes first (irrespective of when the actual payment of the monetary amount occurs).
- The obligation to issue invoices depends on whether the business in question benefits from the EU OSS procedure, and thus the exemption from the obligation to issue VAT invoices, or does not use the EU OSS procedure and is required to issue a VAT invoice.
- OSS procedure.
3) The OSS procedure is divided into EU and non-EU procedures
- The following businesses can benefit from the EU procedure:
- Those having its seat (permanent place of business) in the EU territory for the purposes of settling and paying the VAT due under the WSTO,
- Those providing services to consumers (B2C), for whom the place of supply is the EU country, in which they have no registered office (permanent place of business),
- Those who do not have their registered office (permanent place of business) in the territory of the EU for the purpose of declaring and accounting for VAT under the WSTO.
- Registration with the OSS procedure means that a business will be required to settle the VAT due on all activities covered by the procedure, solely under the OSS procedure.
- The non-EU procedure may be used by businesses not having their registered office (permanent place of business) in the territory of the EU, who provide services to consumers (B2C) subject to VAT in the territory of the EU.
- In the OSS procedure, the input tax is settled on the basis of VAT-REFUND, unless the business in question is registered in a given country for other activities not covered by OSS procedures - then the input tax should be settled in the declaration submitted in that country.
Due to the variety of issues related to e-commerce VAT and the analysis of many new institutions, the scope of the tax explanations published by the Ministry of Finance is very wide.
The next article will discuss (the issues concerning) further amendments connected with e-commerce VAT.
Martyna Przegalińska, Tax Consultant, ATA Tax Sp. z o.o.
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