New CJEU Ruling in Polish case - possible recovery of non-neutral ICA / import of services costs
Yesterday the Court of Justice of the European Union (CJEU) issued a significant judgement in Polish case (C-895/19), concerning the compliance of the Polish regulations regarding intra-community acquisition of goods (ICA) with EU-Directive. The currently Polish VAT regulations depend “neutral” deduction of input VAT on ICA (i.e. in the same period as output VAT, based on reverse charge mechanism) on certain formal requirements (receipt of the invoice documenting the ICA, as well as correct reporting of tax in VAT return) to be fulfilled in statutory, 3-month deadline.
Once the 3-month period expires, output VAT is payable together with penal interests for late reporting, so that input VAT reported in the ongoing VAT return does not equal the amount paid. Furthermore, in case of an on-going tax proceeding regarding unreported ICA transactions – additional VAT sanction may apply.
CJEU concluded that above described Polish limitations are not in line with the EU Directive - as they break the rule of neutrality and proportionality of the VAT system. It should be also indicated that although the judgement directly considered ICA transactions (goods-related transactions), its conclusions shall apply also to “import of services” (services purchased from foreign entities), which are VAT-settled under similar statutory conditions.
The judgment is essential for many Polish VAT taxpayers - not only it clears the situation for the future, but most importantly enables them to recover overpaid VAT from the past (including also penal interest), as well as potentially reclaim wrongly incurred VAT sanction. Precise impact of the judgement and consequently particular actions to be taken shall be assessed individually – depending on taxpayer’s VAT position and scope of past transactions.
Please note that the application for overpaid VAT refund shall in general be submitted to the authorities within 30 days from the date of publication of the judgement (the publication will most probably take place within the next month).
If your Company is somehow affected by these regulations and therefore you may be entitled to recover overpaid tax - please feel free to contact us for support.