Works on implementing the EU e-commerce package are gathering pace. On 1 February 2021, the second version of the draft amendment to the VAT Act implementing these provisions was published.

The first version of the amendments was published in the second half of October 2020. Since then, a public consultation has been carried out and interdepartmental agreements have been held. As a result, the second version of the draft amendment has been prepared whereby considerable changes have been introduced. All that notwithstanding, the key elements of the e-commerce package, already included in the primary draft amendment, remain unaffected.

Who does the e-commerce package refer to?

Contrary to popular belief, the new regulations resulting from the e-commerce package concern not only sellers having their legal seat outside the EU or entities operating popular internet trading platforms designed for selling goods imported into the EU. Although the package, to a large extent, is a range of facultative solutions, so their implementation in the place of the ordinary VAT rules depends on the taxpayer’s decision, all taxpayers whose activities feature a cross-border character, even on a relatively minor scale, should still pay attention to the package.

Sales of goods to consumers (non-taxpayers) from other EU member states

Until the end of June 2021, the  current rules concerning mail-order sales from the territory of the country remain in force. On their basis, delivery of goods from Polish taxpayers to consumers from other EU states are subject to the Polish VAT regulations until the total net value of supplies to a given country in a respective calendar year exceeds a threshold specified by that country, which is between EUR 35,000 – 100,000. Once the threshold is exceeded, the place of taxation changes – the tax should be applied in the country of the consumer who purchased goods from the Polish taxpayer (more precisely: in accordance with the local VAT rate appropriate for that country). This incurs an obligation to register for VAT purposes in a given state – or even in several states – if all the thresholds established by all the states concerned have been exceeded.

The e-commerce package modifies these rules significantly. Apart from changing the name of such a transaction (from mail-order sale from the territory of the country into EU-wide “intracommunity distance selling of goods” – “IDSG”) a key novelty is the considerable limitation of the possibility of VAT settlements of such supplies in Poland.

The current domestic thresholds (separate for each state) will be replaced by a single EU-wide annual threshold which will be merely PLN 42,000 net for taxpayers with their legal seat in Poland (this amount will be the equivalent to the EU-wide EUR 10,000). Critically, when calculating the threshold not only will the value of goods delivered by the current mail-order sale be taken into account, but also the value of telecommunications, broadcasting and electronic (so-called TBE) services for consumers. What is more, from 1 July 2021 on, taxation of supplies in Poland will only be possible when the abovementioned threshold has not been exceeded in the current and previous calendar year. Thereby, the regulations make no provision for any postponement of the application.

In light of the above, taxpayers who processed deliveries by mail-order from Poland to consumers from other EU states in 2020, or during the first half of 2021 of a total net value exceeding PLN 42,000 (the amount for all EU states), will have to tax their deliveries (and provision of TBE services) in the consumption state, i.e. in the consumer’s state of residence.

Taxpayers whose place of taxation will change with effect from 1 July 2021, will be allowed to select between the two solutions below:

  1. Registration for VAT purposes in consumption states, which may often entail an expensive obligation to keep records in compliance with foreign regulations and submit declarations in given states, or
  2. Registration in Poland for a new EU procedure (One-Stop-Shop), according to which a taxpayer will have to submit a quarterly declaration to the Polish VAT authorities, in which all deliveries to consumers from respective EU states will be presented, and on the basis of which will pay to a Polish tax office the amount of VAT due to all EU states (the Polish tax authorities will redistribute among] themselves the amounts due to all individual states).

The new EU procedure indicated above (OSS) is actually like the current Mini-One-Stop-Shop procedure used today to make VAT settlements of TBE services, but is extended with new commodity transactions. Applications for registration for purposes of the new EU procedure in order to settle IDSG can be submitted from 1 April 2021 (just to be ready for the new reality starting from 1 July 2021). What is relevant, the choice will be made on an “all or nothing” basis – neither a selection by country (for instance, a settlement of German VAT conducted by submitting a declaration to German tax authorities, and VAT settlements concerning the rest of the countries by means of OSS), nor a selection by transaction subject (for example, IDSG settlement by means of OSS, and showing TBE or other taxable services outside Poland in self-submitted declarations – see remarks below).

Provision of services from customers from other EU states subject to VAT outside Poland

As a general rule, the VAT regulations indicate that the place of taxation of services provided for non-taxpayers (mainly consumers) from outside Poland is the state where the service provider has their legal seat (Poland for Polish VAT payers). However, there are several exceptions to this rule for which the VAT regulations say that taxation should be applied in another country – the country where the service is received. First and foremost, this concerns:

- property valuation and valuation of works on the property;

- transport services

- ancillary services to transport ones, such as loading, unloading, reloading and the like;

- catering and restaurant services;

- services in the field of culture, art, sport, science, education, entertainment (including fairs and exhibitions) and

- services related to real estate located outside Poland.

Currently taxpayers providing taxed abroad services of this type (notwithstanding their value) are usually obliged to register for VAT purposes in a given EU state. The e-commerce package will allow to limit costs connected with this problem – from 1 July 2021 on, taxpayers will be allowed to apply the abovementioned EU procedure OSS. The given procedure will allow from 1 July 2021 to make settlements of any types of services provided for foreign (EU) consumers when the VAT regulations indicate that such services should be taxed outside Poland. Although the application of OSS does not exempt from the obligation to cover the services with appropriate tax rates depending on the country, this solution will enable a taxpayer to submit one quarterly declaration and pay VAT due to all the EU states considered by means of a single money transfer to a Polish tax office. However, it should be borne in mind that the “all or nothing” rule will be obligatory in this case too. The use of OSS will incur an obligation to settle all eligible transactions according to the EU procedure. Thus, it will not be possible, for instance, to settle foreign VAT on cross-border services by means of OSS while maintaining the IDSG settlement outside the EU procedure (if, of course, the taxpayer performs both types of transactions).