Cross-border VAT refund in Poland

Have you conducted purchases in Poland for your business and the prices for the purchases included VAT? Or maybe have you imported good to Poland and paid the output VAT on the border? In this article we describe, how you can get the refund of the paid VAT form the Polish state.

Purchases abroad in the system of VAT

This is the most important principle of the VAT: The output VAT, with which the entrepreneur is charged by the purchase, may be deducted by him/her, if it is not the final consumption. If the acquired goods/ services are used to carry out taxable activities, the entrepreneur can deduct the input VAT incurred by the acquisition as output VAT.

On all levels of the economic process the VAT on the so-called “added value” is levied. The added value is the difference between the net sale price and the net acquisition price of the goods. The entrepreneurs deduct the input VAT from the output VAT and pay to the tax office only the difference.

The functioning of the system is clear if all phases take place in the same state. Everybody In the supply chain pays only this part of VAT to the tax office, which corresponds to the added value, which was created by him/her. Ultimately the tax authority gets from all participants in the supply chain the sum of the incurred VAT.

The situation gets complicated if some of the phases take place in another state. In such case the tax will be charged in another country as the country, in which the final consumption takes place. It may happen, that e.g. an entrepreneur has acquired in the A-State taxable services or goods, which he will use to carry out taxable activities in the B-state. If the VAT system of both states were not connected, the entrepreneur would have to bear the burden of the VAT twice:

To ensure the neutrality of VAT for entrepreneurs in such cases, the EU member states have decided to introduce a special procedure of cross-border VAT refund for EU businesses.

The procedure of cross-border VAT refund in the European Union.

The cross-border VAT refund was introduced by the EU Directive 2008/19. This procedure is EU-wide unified and is mandatory for all EU member states. This procedure should ensure, that the member state of acquisition will grant the VAT refund to the entrepreneur also if the sale is conducted in another member state.

How does the procedure function in practice?

The entrepreneurs, who have incurred the VAT costs in another member state in connection with the purchases, have the possibility to file an application for the VAT refund to the tax authority of their own member state. The tax authority of their own member state conducts a preliminary review of the application and then forwards it to the competent tax authority of the member state of refund. The member state of refund examines whether all the remaining conditions for the VAT refund are met. After the examination is closed, the applicant receives a notification from the member state of the refund. It the application was accepted the applicant receives subsequently refund on his/her bank account from the member state of refund.

Example:
The company Arrow BV with the seat in the Netherlands has no fixed establishment in Poland and carries out no sales in Poland.

The services of the real estate appraisal are subject to taxation at the place, where the real estate is located (Article 28e of the Polish VAT Act) – in this case in Poland. The expert has accordingly issued an invoice with the 23% VAT: 10.000 PLN + VAT 2.300 PLN.

Arrow BV has no possibility to deduct the incurred VAT in its own Dutch VAT return, since the tax was incurred in Poland. To get the refund of the paid VAT 2.300 PLN, Arrow BV should file an application for refund of the Polish VAT to the Dutch tax authority. The application will be subject to preliminary review by the Dutch tax authority and then forwarded to the Polish tax authority. If the Polish tax authority accept the application, it will pay the incurred VAT 2.300 PLN on the bank account of the company Arrow BV.

Who can claim the VAT in the refund procedure?

The foreign entrepreneurs, who are established in the EU and want to claim the Polish VAT, must:

There are some exceptions to the condition of non-execution of supplies in Poland. There are types of supplies, which may be carried out in Poland and do not negatively impact the possibility to apply the cross-border VAT refund. These are in particular:

The registration to the VAT in Poland does not exclude the possibility to apply the cross-border VAT refund. The entrepreneurs that are registered to Polish VAT may apply for the refund of the Polish VAT in the cross-border VAT refund procedure, if all the relevant conditions are met.

In what form should the application be filed?

The applications for the refund of the VAT incurred in Poland are to be filed via the electronic portal in the member state of residency of the entrepreneur. The member state of the residency, after the preliminary review, will forward the application to the Polish tax authority.

What documents are necessary?

The applicants need to submit copies of invoices or importation documents where the taxable amount on an invoice or importation documents is EUR 1000 (or equivalent in PLN) or more. If the invoice concerns fuel, the threshold is EUR 250 (or equivalent in PLN).

The copies invoices should be attached to the electronic application for the VAT refund.

What is the deadline to submit the application for the VAT refund?

The application for the VAT refund shall be submitted until 30 September of the calendar year following the refund year.

What input VAT may be refunded?

The EU-entrepreneurs may claim the VAT incurred in Poland, which can be deducted according to the Polish VAT Act.

For what periods the application for VAT refund may by submitted?

The applicant may him-/herself determine the refund period. The refund period:

What is the minimal refund amount?

The requested refund amount must amount to at least:

What is examined by the local tax authority?

The application for the VAT refund is to be submitted at the competent tax authority in the member state where the applicant has its seat. After the preliminary review, the local tax authority will forward the application to the Polish tax authorities.

The local tax authority must decline the application if the applicant in the refund period:

What is examined by the Polish tax authority?

After receiving of the application, the Polish tax authority conducts its own examination of the application. The Polish tax authority will decline the request in the following cases:

Reason for rejection 1:
The input VAT, whose refund was requested, are documented with invoices, which do not comply with the Polish regulations concerning the invoicing.

The applicant must have at his/her disposal the invoices, which are issued in compliance with the Polish regulations. Otherwise the application will be rejected. It is therefore advisable to review the invoices bevor the submission of the application and, in necessary, request the corrections by the issuers first.

Reason for rejection 2:
The purchases, from which the input VAT results, where exports or intra-community supplies.

It happens often, that the Polish suppliers issue invoices with the Polish VAT (standard VAT rate 23%), although the goods are sent directly from Poland to another EU member state and the delivery should be treated as intra-community supply subject to 0% VAT rate. The Polish suppliers refuse to issue invoices with the 0% VAT rate, because the conditions to apply the 0% VAT rate are strict. If they issue an invoice with the 0% VAT rate, they take the risk on themselves, should the tax office question the application of the 0% VAT rate.

The foreign purchasers, who agree with the approach presented by their Polish suppliers and agree on issuance of the invoices with VAT with the hope, that they can get the paid VAT refunded later in the cross-border VAT refund procedure, run the risk, that the Polish tax authority will decline the application for refund.

Reason for rejection 3:
The input VAT is not deductible according to the Polish regulations.

The Polish regulations stipulate a prohibition on deduction for some expenditures, e.g. accommodation or catering services.

How long does is take to process the application for the VAT refund?

The Polish tax office has in principle four months from the date of receipt of the application, to process the application.

However, the deadline may be prolonged, if the tax authorities need more information to decide upon the application. The deadline to process the application can be prolonged maximally to eight months.

What happens if the Polish tax authority need more information from the applicant?

It happens often, that the Polish tax authority need more information from the applicant to review the facts of the case thoroughly and be able to decide, whether the application is indeed justified. The tax authority would demand then from the applicant a precise description of the facts of the case and/or the submission of the documents, which confirm the facts of the case.

The foreign entrepreneurs forget often to attach the invoices (importation documents) that have the value of EUR 1000 or higher (EUR 250 in case of invoices concerning fuel). In this case the tax authority would request the submission of those invoices.

The documents and information shall be submitted to the Polish tax office within one month from the receipt of the request from the tax office.

If the provided explanations and documents are not sufficient for the Polish tax authority, it may request once more the applicant to submit specific information/ documents. The tax office may send such requests to the applicants maximally twice.

Is it possible to communicate with the Polish tax office in English?

No. The Polish tax office accepts only Polish language.