SALES SUBJECT TO VAT REVERSE CHARGE
If you intend to sell to other businesses, inter alia, electronic equipment (telephones, consoles, laptops) the so-called procedure of reverse VAT reverse charge will apply to you. It means that the buyer, not the seller of goods undertakes to pay the tax.
The VAT reverse charge procedure is regulated in the Act of 11 March 2004 on the goods and services tax and in annexes. The list of products includes, inter alia, steel, gold material or semi-manufactured or electronic equipment sold wholesale.
An invoice confirming a supply of goods covered by the reverse-charge system does not contain data on:
- tax rate
- net sales value,
- the amount of tax.
It should be marked REVERSE CHARGE, which gives rise to an obligation for a settlement by a purchaser.
Who is entitled
The procedure for reverse VAT applies if
- the supplier is a taxable person who does not benefit from the exemption from the tax (limit of PLN 200,000)
- the purchaser is an active VAT taxable person;
- supply is not covered by the exemption, namely the use of the goods will not be associated solely for an activity exempted from VAT.
Entrepreneurs purchasing products covered by the procedure must remember that they are obliged to settle and pay VAT.
Limit for electronics
In the case of transactions in electronic products, such as: mobile phones including smartphones, laptops, video game consoles and other devices for games of skill or chance with an electronic display (excluding parts and accessories), the reverse charge mechanism is applicable only where the total value of goods within a uniform economic transaction covering those goods - without tax - exceeds the amount of PLN 20,000.
A uniform economic transaction is one that includes:
- contract which covers one or more supplies of goods from the category of electronics (covered by the reverse charge) , even if they are made on the basis of separate contracts or there are more invoices issued documenting individual consignments,
- more than one contract if the circumstances of the transaction or the conditions under which it was implemented, differ significantly from the circumstances or conditions normally encountered in trade in electronics.
The tax liability in the case of the supply of goods covered by the reverse charge system arises when the goods are delivered. If the payment was received in whole or in part before the supply of goods, the liability to pay the tax shall arise when it is received in relation to the amount received.
Reverse charge regarding construction services
Since 2017 following the amendment to the VAT Act certain categories of construction services and of assembly have been covered by reverse charge mechanism. Such services include, inter alia, the construction of residential and non-residential buildings (new works, additions, alterations and renovation works), earth moving, plastering work, painting, etc. You can find the full list in Annex 14 to the VAT Act.
- See the explanations of the Ministry of Finance regarding the reverse charge in the construction services.
Right to deduct input tax
In the case of reverse charge mechanism, the amount of tax due constitutes the amount of input tax and at the same time the buyer has the right to deduct that tax under the general rules (i.e. to the extent to which the goods are used for carrying out taxable activities) in the settlement for the period in which the tax obligation arised, on condition that the taxable person (the purchaser) will take account of the amount of tax due on the transactions in the tax return in which he is required to settle this tax, at the latest within 3 months following the month in which the liability to pay the tax arises in respect of purchased the goods.
When the amount of tax due is taken into account by a taxpayer after more than 3 months from the end of the month in which the tax liability arose in respect of purchased goods, the taxable person may increase the amount of input tax in the settlement for the tax period which has not yet expired for submitting a tax return.
Please note that taxable persons supplying goods or services for which the taxable person is the purchaser (reverse charge), are obliged to submit to the Tax Office summary information on the supplies of goods and services referred to as "summary information in domestic trade" (VAT-27). Summary information should be submitted for monthly periods by means of electronic communication by the 25th day of the month following the month in which the tax liability arose in respect of of the transaction.
Correction of information VAT-27
The correction shall be submitted similarly as the correction of VAT return on the same form ticking in the VAT-27* information in box 7. Reason for submission the form" box "2.correction of information". Correction of information should contain all the correct data demonstrated in a previously submitted summary information and the corrected data (which required correction). If the correction concerned the column "b", "c" or "d" of the form, in the column ‘a' mark "Yes". In the case of correction in column ‘d' value to zero (0), in column ‘b' and ‘c', the purchaser data must be repeated and in column "d" enter "0,00", and in the column ‘a' mark "Yes".
More on VAT-27 can be found in the publication Summary information in domestic trade.
* The number of columns refer to VAT-27(2) forms
The purchaser shall settle VAT on the goods purchased at the same time taking into account the output and input tax as well (neutral transaction in terms of VAT).
The buyer has the right to deduct that tax under the general rules (i.e. to the extent to which the goods are used for taxable activities) in the settlement for the period in which the tax liability arose, provided that the taxable person (the purchaser) will take account of the amount of tax due on the transactions in the tax return in which he is liable to account for the tax.
The taxable amount shall be everything which constitutes consideration which suppliers of goods received or are to receive from the purchaser or from a third party, including their respective grants, subsidies and other aid of a similar nature which directly influence the price of goods supplied by a taxable person. The taxable amount shall include:
- taxes, duties, levies and other charges of a similar nature, with the exception of the amount of tax;
- additional expenses, such as commission, packing, transport and insurance costs, charged by the supplier to the customer.
- By filling out VAT-7 VAT-7K * supplier shows the total amount of the taxable amount of supplies of goods subject to the reverse charge in Part C, item 31.
- The purchaser is required to demonstrate these transactions in VAT-7K(17), VAT-7K(11) declaration, in Part C, item 34 and 35 and at the same time - if the goods are to be used by the taxpayer to carry out taxable activities - he is entitled to deduct in part D.2. respectively in item 43 and 44 (if the purchase is classified as fixed assets) or in items 45 and 46 (in the case of acquisition of other goods).
* The numbers refer to the VAT-7(17) VAT-7K(11) forms.
Find out about the changes in VAT since 2017.