Charging VAT for services outside of Poland

Specially for our clients we have prepared answers to the most frequently asked questions about charging VAT for services outside of Poland.

I own a company outside Poland and I am not registered for VAT - should the issued invoices be charged with a full VAT rate?

In accordance with the Polish law (article 28b of VAT Act), selling services outside the Polish territory is not subject to VAT. Therefore, we can not issue VAT invoices to a taxpayer who purchases our services.

In short - no matter if our customer (a taxpayer) is registered in his country as a VAT payer or not. The only criterion is whether he is a taxable person, that is a person conducting business activity or owning a company.

VAT applies only to services performed within the territory of Poland. In case of services concerning entities established abroad, provisions regarding the place of performing services are of crucial importance (articles 28a–28o). If a foreign entity with the status of a taxpayer (an entity independently running a business activity) is the recipient of services, the place of providing services is the place where the entities head office is registered (or a fixed place of running business if it is located in a country other than its main office and a services are performed for this permanent place), article 28b.

In such situation, we are dealing with an "export of services" - services are performed by Polish entrepreneurs for the contractors outside the country. Examples - activities performed by graphic designers, programmers, translators or advertising companies providing services to clients from the European Union, the United States and other countries.

How to settle up the "export of services"?

A characteristic feature of services performed for EU companies is that the place of performing the provision is the main office (or a place of performing business activity) of the recipient. This means that in terms of VAT it is assumed that a graphic designer creating a website for a company from, for example, Germany, according to the regulations provides the service in Germany, not in Poland (although he actually performs the task in Poland). Consequently, he does not have to add VAT to sales - that responsibility rests with the buyer.

To sum up, the fact that you are not a VAT payer in your home country and you conduct sales in the European Union does not matter, as invoices take the same form.

How to determine tax status of the entity?

Referring to the point above, while determining the tax status of the entity, first you should determine whether your customer has an established business. Lack of registration for VAT purposes is in this case irrelevant. If a given entity has an established business, it means that it is a taxable person in the light of rules determining the place of providing services. No VAT identification number does not result in the entity not being recognized as a VAT payer if its tax status will result from other evidence.

Who is considered to be a taxpayer?

  • "an entity that independently performs a business activity mentioned in the article 15 paragraph 2 or a business corresponding to this activity, whatever the purpose or the result of such activity" (article 15, paragraph 6).
  • "non-taxable legal person on the basis of the above section, which is identified or obliged to be identified for tax or value added tax"

"According to the article 28a point 2 of the above mentioned Act, a taxable person who also conducts activities or performs transactions that are not considered taxable, product shipment or services pursuant to article 5, paragraph 1, shall be deemed to be a taxable person in respect of all services provided."

This guide was writted in consultation with an experienced accountant and based on the article "Electronic services provided to a European company not registered for VAT :http://www.sgk.gofin.pl/11,3992,188657.

Above article should not be considered as legal advice - it has an informative character only.