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Time limit for declaring intra-Community acquisitions: Poland condemned by the Court of Justice
Judgment of the Court of Justice of 18/03/2021 - C-895/19
When a company buys goods that are delivered to Poland, it performs what is known as an intra-Community acquisition of goods on Polish territory. The company must apply for a VAT number beginning with the letters PL and fulfil all related reporting obligations in Poland. In particular, it must self-assess VAT on this transaction in a Polish VAT return.
What is the problem in Poland?
In order to encourage discipline for businesses and combat fraud, the Polish legislator decided in 2017 to introduce a three-month time limit within which VAT must be self-assessed in the VAT return (the so-called Article 86(10b)(2)(b) of the VAT Act).
If, for any reason, the business exceeds this three-month period (e.g. late receipt of an invoice, incorrect classification of the transaction by the business or error on the part of the person responsible for VAT returns, late or irregular issue of the invoice, postal delays, etc.), it can no longer self-assess VAT on the transaction but will have to declare the VAT due in an amending return (corresponding to the period in which it should have declared it). It will also be entitled to recover this tax for 5 years.
Illustration:
Let's illustrate the rule as follows: a company buys goods which are delivered to Poland in April. The Polish VAT due on this transaction must be self-assessed in the April VAT return or, if not, in the July VAT return at the latest. If the company receives the invoice in December, it will have to adjust the return submitted in April to include the VAT due. However, it will only be able to claim the refund from its December return. There is therefore an eight-month gap between the amount of VAT due and the amount of deductible VAT on the intra-Community acquisition, with the result that interests for late payment is applied.
The Court of Justice condemns Poland
Does Polish law comply with the VAT Directive? No. And the Court of Justice has just reminded us of this very bluntly.
It comes out case laws of the Court that, under the reverse charge system, the fundamental principle of VAT neutrality requires that input tax deduction be granted if the substantive requirements are met, even if certain formal requirements have been omitted by the taxable person. As long as the tax administration has the necessary data to establish that the substantive requirements are met, it cannot impose additional conditions on the taxable person's right to deduct that tax which may have the effect of nullifying the exercise of that right.
It would be contrary to this logic to make the taxable person temporarily bear the burden of the VAT due in respect of an intra-Community acquisition, a fortiori when no amount is due to the tax authorities for this type of transaction.
The court concluded that the Polish VAT regulations were contrary to the VAT Directive.
Important to remember
Businesses with a Polish VAT number have probably all been confronted at some point with the rigors of the Polish VAT code and the rigidity of tax officials.
Those who have paid fines and/or interests for late payment because their intra-Community acquisitions were not included in the correct VAT return can take action to claim reimbursement of these amounts from the Polish State.
Source: Judgment of 18 March 2021, C-859/19
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