Polish VAT Requirements & The VAT Directive
In a recent case, the Polish Supreme Administrative Court asks: if there is a requirement to reduce the taxable VAT amount in the initial invoice, whether the taxpayer must possess confirmation that the purchaser received the correcting invoice (Polish provision), and whether this needs to be in line with Article 90(1) of the VAT Directive. If it is in line with the VAT Directive, the question is whether it should follow the principles of VAT neutrality and proportionality. Taxand Poland discusses the court's case, the collection of VAT and what taxpayers need to do to effectively reduce the VAT on the initial invoice.
The verdict is contrary to what most taxpayers were expecting. According to the judgment, a Member State is fully entitled to impose the requirement that the taxpayer must possess the confirmation that the purchaser received the correcting invoice to reduce the taxable amount. This means that in the EU member countries, where this obligation is in force, provisions must befully in line with the VAT Directive.
The Court's justification says that the mentioned requirement does adhere to Article 90(1) of the VAT Directive. The common VAT system provides that the taxable amount should include everything which constitutes consideration obtained by the supplier in return for the supply from the customer or a third party. In particular, where the price is reduced after the supply takes place, Article 90(1) of the VAT Directive provides that ‘the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States'.
In this case, where the price is reduced after the supply has taken place, under the Polish legislation, the corresponding reduction of the taxable amount is possible only if the taxpayer / seller possess confirmation that the purchaser received the correcting invoice. The purpose of that requirement is to ensure the correct collection of VAT and to prevent evasion.
In the opinion of the Court the above requirement may, in principle, contribute not only to ensuring the correct collection of VAT and preventing evasion but also to eliminating the risk of loss of tax revenue. It follows that Poland is fully entitled to submit that that requirement pursues the legitimate objectives set out in Article 90(1) of VAT Directive.
The Minister of Finance stated before the Court that the given requirement applies only to domestic transactions and is not qualified by any condition as to the form and may be satisfied by any appropriate means (which means e.g. that the confirmation can be done via e-mail). Such a requirement may be regarded as not excessively burdensome for taxpayers, who are suppliers of goods or services. However, the Company submitted that, in practice, the tax authorities will accept only a specific form of the confirmation, namely a copy of the correcting invoice bearing the stamp of the purchaser. It is for the referring court to verify which forms of the confirmation will be accepted by the tax authorities as a proof that the requirement has been satisfied.
The Court stated that correcting invoice enables the supplier / seller to calculate the VAT payable on the basis of the amounts set out in the corrected invoice, or to recover all the excess VAT paid to the tax authorities. The requirement does not, in principle, undermine VAT neutrality. However if it is impossible or excessively difficult for the supplier to recover, within a reasonable period, the excess VAT paid to the tax authorities on the basis of the initial invoice because of the analysed condition, the principles of VAT neutrality and proportionality require the Member State concerned to permit the taxpayer to establish by other means.
To reduce the taxable amount in the initial invoice, the taxpayer/seller must possess confirmation that the purchaser received the correcting invoice. The correcting invoice must be in line with Article 90(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of VAT.
The above means, that in EU member states where the analysed obligation is in force, the taxpayers must collect confirmation that the purchaser received the correcting invoice (in different forms) to reduce taxable amount. However if it is impossible or excessively difficult for the supplier to obtain this confirmation it should be possible to establish actual taxable amount by other means.
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