Does selling goods intended for transport outside Poland qualify as an intra-Community supply of goods (ICS) if the goods aren't transferred right away? The Polish Supreme Administrative Court (SAC) recently ruled on a situation where a company sold goods to a foreign buyer, but the goods stayed in the company’s warehouse for some time. 

Case details

The company requested an individual ruling for an increasingly common business model. When a foreign customer placed an order, the company issued an invoice showing ICS with 0% Polish VAT rate. The goods remained in the company's warehouse until collection or shipment. However, ownership of the goods transferred to the buyer right away. From that point, the company could demand payment from the foreign buyer but could not trade, use, or deliver the goods to anyone else. 

The company believed this transaction should be treated as ICS. Since the company had no documentation confirming transfer of goods to another EU Member State, it assumed it should not report this transaction in sales records and VAT returns for the period when the tax obligation arose. Instead, the company wanted to defer reporting based on specific Polish VAT rules, with the possibility of recognizing the transaction as a domestic supply, if needed later. 

No physical transfer means no ICS 

The SAC ruled against the company, supporting the earlier positions of the administrative court of the first instance and the tax authority which had claimed that this type of transaction had the characteristics of a domestic supply and therefore should have been taxed at the standard Polish VAT rate. 

The key point for the SAC was that while the transaction transferred the rights to the goods, it failed to meet the requirement that goods must be transferred from the Polish territory as part of completing the supply. The SAC emphasized that although ICS rules do not require immediate transport after delivery, the transport must happen "in performance of" the delivery. In this company's case, the foreign buyer collected and transported the goods some time after the supply was completed. The Court noted that having individually marked goods stored separately in the supplier’s warehouse while waiting for the foreign customer did not change this conclusion. 

However, corrections are possible

On the positive side for the company, the SAC noted that treating this transaction as a domestic supply with standard VAT rates is not final. If the company eventually transports the goods from Poland, it will have the right to adjust its VAT settlements to report ICS with a 0% VAT rate. 

This is another judgment of the SAC where the court stressed that physical transfer of goods is necessary for applying the 0% VAT rate. However, the SAC gives businesses flexibility in agreeing with their partners on how and when goods will be collected or shipped.  

These considerations should warn businesses carrying out intra-Community transactions to review how they execute them. Issuing invoices immediately with 0% VAT rate to accommodate foreign buyers’ expectations (despite the goods being stored by the supplier for some time after the supply) may lead to disputes with the tax authorities. 

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In Poland, the tax authorities tend to require detailed evidence from taxpayers for cross-border transactions. One requirement is "monitoring" what happens to goods after they leave Poland. While this may seem burdensome for suppliers (especially sales teams), these practical steps are often sufficient: 

  • Building a good, ongoing relationship with the customer – to be sure who placed the order and to be promptly informed if anything unexpected happens, 
  • Discussing key VAT-related aspects of the transaction before the supply takes place (without requiring disclosure of trade secrets, but gathering data needed to qualify for 0% VAT on movable supplies), 
  • Including additional contract clauses or order-related requirements about how goods should be handled afterward, and ensuring the obligation to share relevant information – particularly for immediate resale or when non-standard shipping arrangements are agreed. 

When implemented consistently, these measures can significantly reduce the risk of disputes – or provide protection if a disagreement arises. To be truly effective, these actions should be supported by well-structured processes, tailored to the size and specific operations of the business. 

If the supplier does not regularly verify who ultimately receives the goods and under what conditions – especially when the supplier does not arrange transport – there is a real chance this information will only surface during a tax audit. At that point, it may be too late to avoid potential VAT exposure. But it might still be early enough for tax authorities to start criminal tax proceedings against the supplier's representatives.