VAT refund from Poland

General Comments

In vast majority of cases, the purchase of goods and services is evidenced by an invoice with VAT shown, issued by the supplier of the goods or services.

In accordance with the principle of neutrality, VAT should not constitute a cost for the entrepreneur who purchased such goods or services. It means that the business entity which resells purchased goods or services or which uses them for the purposes of its own business should not bear the economic burden of VAT.

In order to guarantee the adherence to this principle, the directive 2006/112 and, consequently, Polish VAT Act, provided the right to business entities to deduct input tax shown on the invoice confirming the purchase of goods or services. Therefore, the legislator decided that to the extent goods and services are used to perform activities subject to VAT, the taxpayer (business entity) has the right to reduce the amount of the output tax by the amount of the input tax. The principle of neutrality under discussion laid down the foundations for the creation of the current EU system of the value added tax. Also, it became the basis construction principle of the VAT system. On the other hand, the abovementioned deduction of the input tax constitutes the basic tool through which the neutrality principle is satisfied. The weight of the principle and the importance of its satisfaction through proper application of the deduction of input tax have been emphasised on numerous occasions in the case law of the Court of Justice of the European Union which has often emphasised that the right to deduct the input tax was a structural element of the VAT and not a form of tax relief or a privilege.

The VAT Act adopted the rule of immediate deduction, in other words, not based on the principle of tax deduction only at the time when the purchased goods or services are resold or effectively used for the purposes of activities subject to VAT. As a result, it is possible to have a situation where, most often on temporary basis, the taxpayer will demonstrate the surplus of input tax over output tax.

In that case, the VAT Act introduces the possibility of both transferring input tax surplus to the following settlement periods (this possibility is sometimes called an “indirect refund”) as well as the possibility of receiving actual refund of the surplus of the input over the output tax by the taxpayer.

The procedure of tax refund to Polish entities

The legislator decided that the VAT refund will take place within the specific time-limits:

  • 60 days - standard time-limit;
  • 25 days – accelerated time-limit after meeting specific conditions (e.g. input tax arises from invoices that were paid through a bank account, the amount of tax not settled in previous settlement periods and demonstrated in the tax return does not exceed PLN 3000);
  • 25 days – accelerated time-limit for the refund of tax to the VAT account of the taxpayer kept under split payment regime;
  • 180 days – extended time-limit if the taxpayer did not perform any activities subject to VAT in Poland during the settlement period.
Also, it has to be added that in connection with the introduction of the split payment into Polish legal system, also the transfer of the funds collected by the taxpayer on the VAT account (in split payment system) to an ordinary bank account may take place. However, such transfer is not treated as the refund of VAT within the meaning of Article 87 of the VAT Act.

It has to be emphasised that the filing of a request for the VAT refund may involve review activities or tax audit by the tax authorities in order to verify the legitimacy of the refund. In that case, all documents related to the transactions that have generated input tax on the entrepreneur’s side are subject to review. Also, the use of the goods and services purchased by the taxpayer may be subject to the review.

Any irregularities found, in addition to the prolongation of the statutory deadlines for VAT refund, may result in the lack of the refund and even in the determination of tax arrears by tax authorities.

The procedure of tax refund to foreign entities
 

The legislator envisages VAT refund to foreign taxpayers who did not carry out in Poland any activities subject to VAT.

The tax refund to foreign entities is governed by the provisions of the directive 2008/9/EC of 12 February 2008 laying down detailed rules for the refund of value added tax.

In Accordance with the VAT Act, eligible entities from the EU Member States may apply for the refund of tax, i.e. natural persons, legal persons and organisational units without legal personality that do not have registered office of business activities or permanent place of conducting business in the territory of Poland.

Also, foreign taxpayers from outside of the European Union are also entitled to a refund; such taxpayers are understood as natural persons, companies (legal persons) and organisational units without legal personality that during the period for which the tax refund is requested did not have registered office of business activities or permanent place of conducting business in the territory of Poland. Such entities are entitled to a tax refund after meeting appropriate conditions, e.g. such entities are registered for VAT in a given EU Member State and have not carried out sales in the territory of Poland, i.e. supply of goods for payment or delivery of services for payment in Poland, exports of goods or intra-Community supply of goods.

An entity from the EU Member State or an entity from a third country may apply for tax refund for a specific period but not shorter than three months.

The amount of the requested tax refund cannot be lower than:

  • EUR 400 – if the request applies to a period shorter than one tax year but being at least three months;
  • EUR 50 – if the request applies to the entire tax year or a period shorter than the last three months of that year.
The refund of the tax to an entity from the European Union is made at the request of such entity sent electronically by tax administration of the Member State where the entity’s registered office is located.

The refund of the tax to an entity from outside of the EU is made at the request of that entity submitted in writing.

The request is submitted to the head of tax office, not later than until 30 September of the year following the tax year which the request applies to. Based on the request, tax authorities issue a decision about the amount of the recognised tax refund within four months from the date of its receipt.

If tax authorities consider that they do not have all information based on which they should make the decision, then they may request additional information and explanation.

Summarising the above, we should distinguish:
 
  • VAT refund for taxpayers with their registered office in Poland,
  • VAT refund for foreign taxpayers without registered office in Poland but conducting business activities in Poland (e.g. sale of goods),
  • VAT refund for foreign taxpayers without registered office in Poland and not conducting business activities in Poland,
  • VAT refund for taxpayers from third countries (i.e. having their registered office outside of the European Union).
The filing of a request for a VAT refund by a taxpayer belonging to one of the above groups, will result in the application of relevant tax refund procedure. The procedures differ between one another, for example, by their duration, rights of tax authorities or obligations imposed on the taxpayer.

However, a common denominator is the verification by the tax authorities whether tax refund is justified, in other words, if the request for refund is in a correct amount and if there is documentation confirming factual circumstances that involve tax refund. Therefore, the filing of the request should be preceded by the audit carried out by the taxpayer with respect to the executed operations. This will enable not only to identify potential irregularities but also to adjust them before the tax audit has started.

Should you decide to apply for a VAT refund, MSCA will provide you with appropriate support. We can analyse factual circumstances and assess the legitimacy of the request, as well as we may prepare the request and represent you during potential review or tax audit.