Services do not qualify as imported when they are provided by a branch of a company registered as a value added tax (VAT) payer in Poland, according to a judgment by the District Administrative Court (WSA) in Warsaw.
According to the WSA’s judgment on 25 June 2009 (case III SA/Wa 245/09), a company with a registered office outside Poland that is registered as a VAT payer in Poland will have a permanent place of business in Poland for VAT purposes. This interpretation means that services purchased from a non-Poland-based contracting party that has a branch in Poland should be settled by the Poland-based purchaser not as imported services but as domestic services.
The judgment was based on the VAT Act before the last amendment (which occurred 1 December 2008). Prior to the amendment, Article 17, Section 1, Point 4 of the VAT Act stated that VAT payers are persons who purchase intangible services (such as IT, consulting or advertising) from economic entities with a seat or place of business outside Poland. The standard interpretation of this article indicated that Poland VAT payers should settle VAT as an importation of services. However, the amendment specifies that the importation of services does not include transactions in which the service provider is a non-Poland-based company with a permanent place of business in Poland – e.g., a branch.
The WSA in Warsaw stipulated that the amendment made the VAT Act’s provisions more precise. In the court’s opinion, although regulations that were in force before 1 December 2008 were imprecise, their appropriate interpretation should give the same result.
Revolutionary in the light of previous practice, the WSA’s judgment indicates that the definition of a fixed place of business or seat should be interpreted more widely. In particular, if the taxpayer has a seat outside Poland but is also registered as a VAT payer in Poland and has a permanent place of business (e.g., a branch) in the country, then it should be considered that the taxpayer has a seat in Poland.
The interpretation presented in the judgment is worth special attention, mainly because it differs from the previously prevailing view of the tax authorities and administrative courts. The interpretation may evolve into a more common taxation practice that is accepted by the tax authorities.