VAT ID of the taxpayer as a condition for the application of the zero rate for intra-Community supplies

One of the conditions for the application of the zero rate for intra-Community supplies (hereinafter: ICS)in Poland is that the taxable person (supplier) has a valid Polish VAT identification number (VAT ID) at the time of filing a tax return in which the taxable person declares this transaction [1].

The problem arises, for example, when a foreign entrepreneur begins to carry out taxable activities in Poland without first having completed the formalities of registering for VAT and applying for a VAT ID in Poland.

In addition, in some situations, the Polish authorities have the right to deactivate the entrepreneur’s Polish VAT ID, for example if the entrepreneur has failed to submit three consecutive monthly VAT returns [2] or in a situation where the taxpayer does not respond to the authority's requests (premise of lack of contact with the taxpayer [3]).

Taxpayers may therefore find themselves in a situation where they submit a tax return and do not yet have a valid VAT ID at the time of submitting the tax return, either because they are unaware that such an obligation exists or because their VAT ID has been deactivated by the tax office. In this situation, the question arises whether the taxpayer retains the right to the zero rate for ICS even though he does not meet the requirement of an active VAT ID and, if he loses this right, whether he loses the right irrevocably or whether he can apply the zero rate retroactively after getting the valid VAT ID.

Lines of interpretation

Based on the discussed issue, three lines of interpretation were developed:

Strict view of the tax authorities

In the individual interpretations of the tax law given, the authorities take a consistent view that the condition for the application of the zero rate for ICT is that the taxpayer has a valid VAT ID in Poland when submitting a tax return in which this supply of goods must be duly declared [4]. According to the authorities, the taxpayer has the right to apply a VAT rate of 0% provided that he has registered for the purposes of intra-Community transactions within the statutory deadline for filing a tax return. In the light of this interpretation, failure to register for the purposes of intra-Community transactions within the set deadline cannot be remedied in any way at a later date.

It should be stressed that this is a stricter interpretation than that which is apparent from the content of the provision. It is clear from the wording of the provision that the condition for the application of the zero rate is that the VAT identification number is valid at the time the tax return is submitted, and not at the time of expiry of the statutory deadline for submitting the tax return.

Liberal jurisprudence of the voivodeship administrative courts

In the years 2008 to 2011, administrative courts have repeatedly dealt with the question that was problematic in the legal status at the time, namely whether the Polish legislator was right to establish the registration for the purposes of intra-Community transactions as a defining feature of the ICS. At that time, the administrative courts issued numerous verdicts in which they denied the Polish legislator the right to establish such an additional defining feature to the definition of ICS [5].

In the current legal situation, the voivodeship administrative courts have continued the position developed in the former legal situation. In the opinion of the voivodeship administrative courts, such an opinion that failure to fulfil the obligation to register for the purposes of intra-Community transactions before submitting a tax return constitutes an obstacle to the application of the 0% VAT rate is contrary to the provisions of EU law [6].

In the light of the courts' verdicts, the 0% tax rate should be applicable if the material requirements for ICS are met, even if certain formal requirements are not met. It would only be different in two cases:

In the light of this case-law, the automatic refusal of the possibility of applying the 0% tax rate due to the failure to declare for the purposes of the taxpayer's intra-Community transactions is incompatible with the principle of proportionality.

A precedent ruling of the Supreme Administrative Courts

A break with current case law is the ruling of the Supreme Administrative Court of 1 March 2019, Ref. I FSK 172/17. The court agreed with the tax office that the taxpayer has the right to apply the zero rate provided that he has registered within the (legal) deadline for submitting a tax return for the purposes of intra-Community transactions.

The Supreme Administrative Court refers to the principle set out in the case law of the European Court of Justice, according to which formal requirements are not necessary if the material requirements are met. According to the Supreme Administrative Court, this rule only applies to cases in which the taxpayer has unknowingly failed to comply with the formal requirements when exercising his duty of care. According to the Supreme Administrative Court, failure to comply with formal requirements can only lead to a refusal to apply the zero rate if the taxpayer acted in the mistaken belief that these formal requirements were met, despite exercising all due care.

Contrary to the position of the tax authorities, the Supreme Administrative Court took the view that a taxpayer who did not comply with the obligation to register for the purposes of intra-Community transactions when submitting his tax return has the opportunity to correct the return after the VAT ID has been assigned and to declare the ICT retroactively at a zero rate. According to the court, it is not necessary for the valid VAT ID to be active at the time the statutory deadline for submitting the return expires, but it is sufficient that it is active at the time the VAT return is submitted or corrected.

Practical conclusions

What should you do if you have carried out an ICT in Poland and you have no active entry in the VIES database at the time of submitting the VAT return?

The liberal interpretation of the voivodeship administrative courts, according to which an invalid VAT ID does not prevent the application of the zero rate for the ICT, is certainly attractive. However, the opinion expressed by the Supreme Administrative Court in the above-mentioned judgment is more certain and does not generally represent an excessive burden for the entrepreneur. The entrepreneur should declare the transaction as a domestic supply, register in the VIES as soon as possible and then, after receiving the entry in the VIES, correct the VAT return and report the ICT with the zero rate.

However, it should be borne in mind that the authorities may challenge this approach, that is, correcting the declaration and indicating ICS with a tax rate of 0% for the period during which the entrepreneur did not have an active VAT ID. I recommend two options to entrepreneurs:

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