Problems with accounting for VAT on mail order sales

by Adrian Maczura, Żaneta Niestier

26 August 2020​

Mail order sales in Poland should not generate many problems once they are registered for VAT there. When you use a simple sales model, it should not be difficult, for example, to determine the tax point. However, selling your goods through sales platforms may involve some complications.

Example

A company based in Germany, registered for VAT but with no registered office or fixed establishment in Poland, sells its goods by mail order in Poland. The company also wants to start selling through an "A” platform. Therefore, the company will ship its goods from Germany to an "A" warehouse located in Poland, where the goods will be stored. Then, the goods will be sold to entities that do not account for intra-Community transactions located in other EU countries. Besides, the company intends to have the sale of goods shipped from Poland taxed directly in the destination countries.

Accounting for VAT

One of the activities subject to VAT in Poland is the intra-Community acquisition of goods (ICA). The intra-Community acquisition of goods for a consideration occurs also when a taxable person or someone on their behalf transfers goods which belong to that taxable person, i.e. their own goods (Article 11(1) and Article 5(1)(4) of the Value Added Tax Act).

Such intra-Community acquisition of goods takes place when taxable persons from Germany transfer their goods to the warehouses of company "A” located in Poland.

Therefore, there are three transactions subject to VAT, of which only one in Poland. They involve:

• non-transactional intra-Community supply of goods (ICS) in Germany (under the rules applicable in that country and equivalent to Article 13(3) of the VAT Act);
• non-transactional ICA in Poland (pursuant to Article 11(1) of the VAT Act);
• the supply of goods to customers located in various EU Member States under the rules laid down by Member States.

ICA with 0% VAT rate

Non-transactional ICA may be subject to 0% VAT rate, provided that certain conditions are met. The taxable person transferring their own goods must have a valid identification number for intra-Community transactions, assigned to them by the Member State to which the goods are transferred - in this case Poland.

Choosing the place of taxation for mail order sales

In the next step, to have the transactions taxed in the country of destination of the goods, the taxable person must submit a notice on the choice of the place of taxation on the VAT-21 form. This form is used both to notify your choice of the place of taxation for mail order sales from Poland and to opt out of this option of accounting for VAT. The notice should be submitted at least 30 days prior to the date of supply from which the taxable person wants their sales to be taxed at the chosen place of taxation. Within 30 days of the first supply of goods after choosing the place of taxation, the taxable person is obliged to present to the head of the tax office a document confirming that a competent tax authority in another Member State has been notified of their intention to account for VAT in that State.

For the taxable person, this means it is registered for VAT in that country. As a result, the taxable person issues invoices and files tax returns in accordance with the regulations in force in that Member State. Once the place of taxation has been chosen, it applies for at least 2 years from the date of the first supply made to that place.

Conditions for taxation at the place of supply

Goods are deemed to have been supplied by mail order from Poland to the Member State of destination on the condition that the taxable person has received, before expiry of the deadline for filing the tax return for a given accounting period, documents which jointly confirm that the shipped or transported goods have been supplied to a purchaser in the Member State of their destination. Where basic documents do not confirm the above, additional documents may be used. The basic documents include e.g. shipping documents received by the carrier (freight forwarder). An example for additional documents may be commercial correspondence with the purchaser or the purchaser's order.

In our next article we will discuss how to disclose mail order sales in the VAT return if the supplier has not received documents confirming the supply of goods on time. We will answer the question whether a taxable person making mail order sales taxed in the Member State of destination has the right to deduct input tax on purchases made in Poland.