Import of services and the absence of an invoice
Over the past several decades, under the influence of technological development and the growth of the internet, taxpayers have increasingly and more confidently established contacts with foreign business entities, entering into international transactions, among which the purchase of services can be distinguished. However, it often happens that an entrepreneur does not receive an invoice for the services acquired and is unaware that it is their obligation to settle the import of services regardless of whether they possess an invoice. Let us examine what the import of services is and what should be done in the absence of an invoice.
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Import of services – what is it?
According to the VAT Act, the import of services is the provision of services for which the taxpayer, by virtue of their performance, is the service recipient. Consequently, it is the purchaser who is obliged to settle the services acquired from a foreign taxpayer using the reverse charge mechanism. A Polish entrepreneur purchasing services from a foreign entity must calculate and pay VAT on this account. In accordance with the principle of VAT neutrality, in the case of the import of services the taxpayer is simultaneously entitled to deduct input VAT, provided that the purchase is related to their taxable activity.
In order for a transaction to be considered an import of services, the following conditions must be met:
- the service must be performed in the territory of the country in which the purchaser has their registered office or a fixed place of business;
- the service may be performed by a taxpayer who does not have a registered office or a place of business in that country and is not registered there as a VAT taxpayer.
Tax point and the import of services
The VAT Act does not specify a special moment for the occurrence of the tax obligation in the case of the import of services. Therefore, it arises at the same moments as for services provided by domestic entities. As a rule, the tax obligation for the import of services arises at the moment the service is performed, unless all or part of the payment is made before the service is performed; in such a case, the tax obligation arises at the moment of payment, in relation to the amount paid.
If a service is accepted in parts, it is deemed to be performed at the moment each part of the service is completed, for which payment has been determined.
If services are provided on a continuous basis for a period longer than one year and, in connection with their provision in a given year, the payment deadline has not elapsed, the service is deemed to be performed at the end of each tax year until the provision of the service is completed. If payment for the service is made earlier, the tax obligation arises on the date of payment in relation to the amount received.
Import of services and the absence of a documenting invoice
The lack of an invoice documenting the import of services does not release the taxpayer from the obligation to report the output VAT arising from it in the JPK file (Polish SAF-T). If the taxpayer does not receive an invoice from the contractor, they should report the import of services using an internal document, in the amount paid for the acquired service. This document should include the net amount (i.e. the amount paid), the calculated VAT amount, and the gross amount. These values should be reported in PLN; therefore, if the payment was made in a foreign currency, it should be converted using the average exchange rate of the given currency announced by the National Bank of Poland (NBP) on the last working day preceding the day of payment. If the acquired service relates to the taxpayer’s taxable activity, they are entitled to deduct the input VAT arising from the import of services on the basis of the internal document.
Example:
A Polish active VAT taxpayer purchased a monthly IT service for May 2023 from a German contractor who is also a value added tax taxpayer. By 25 June 2023, the Polish taxpayer had not received an invoice for the acquired services; however, based on prior arrangements, on 30 May 2023 they paid PLN 500 for the service by bank transfer to the contractor’s account.
In this case, the Polish taxpayer should report the output VAT arising from the import of services on the basis of an internal document in the settlement for May 2023. This document should be included in the JPK file for May 2023 with a taxable base of PLN 500 and a VAT amount calculated in accordance with the domestic VAT rate.
Import of services and the right to deduct input VAT
A taxpayer who is an active VAT taxpayer may deduct VAT arising from the import of services, provided that these services relate to their taxable activity and that they have reported the output VAT on their acquisition. In the case of the import of services, the right to deduct input VAT arises in the settlement for the month in which the tax obligation for these services arose. Therefore, if the taxpayer reports output VAT arising from the import of services, they may deduct the corresponding input VAT in the same month. As a result, this transaction is tax-neutral. The right to deduct input VAT arising from the import of services is granted to the taxpayer regardless of whether they possess an invoice documenting the acquisition of these services.
If the output VAT was not reported on time, i.e. in the period in which the tax obligation arose, it is necessary to prepare and submit a correction for that period in which the tax will be settled; at the same time, the right to deduct input VAT arising from this transaction will arise. If the taxpayer forgot to reduce the amount of output VAT by the input VAT arising from the import of services in the same period in which the output VAT was reported, they may do so in one of the three subsequent settlement periods.
Author:
Joanna Głodowska, VAT Specialist at the Warsaw office of MDDP Outsourcing
