On 29 December 2015 the Polish Minister of Finance issued a general interpretation (No. PT1.050.12.2015.ALX.572), regarding the goods and services tax ("VAT") applicable to the supply of spare and replacement parts for medical devices. The aim of issuing the interpretation was to ensure uniform application of the Polish Goods and Services Tax Act ("VAT Act") by tax offices and tax inspection authorities on the one hand, and to establish whether the preferential 8% VAT rate (valid until 31 December 2016) applicable to medical devices as such could be also applied to the supply of spare and replacement parts for medical devices on the other hand.
Before the general interpretation was issued, local tax authorities had been issuing individual interpretations relating to specific cases concerning the supply of spare and replacement parts for medical devices. A multitude of divergent standpoints resulted in an inconsistent interpretation of the VAT Act in relation to the applicability of the preferential tax rate to the supply of spare and replacement parts for medical devices. The general interpretations issued by the Minister of Finance are, as a rule, binding for all tax authorities, and they should be followed by them when deciding subsequent individual cases.
According to the VAT Act (Schedule 3, item 105) the preferential 8% VAT rate is applicable to products which meet the statutory definition of medical devices derived from the Medical Devices Act ("MDA"), admitted into the Polish market, irrespective of their class within the Polish Classification of Goods and Services. Appropriately, the general interpretation of the Minister of Finance restricted the applicability of the preferential VAT rate only to products meeting the statutory definition of medical devices.
The MDA defines a medical device as any instrument, apparatus, appliance, software, material or other article (whether used alone or in combination), including the software intended by its manufacturer to be used specifically for diagnostic or therapeutic purposes and necessary for its proper application, intended by the manufacturer to be used for human beings for the purpose of:
- diagnosis, prevention, monitoring, treatment or alleviation of disease;
- diagnosis, monitoring, treatment, alleviation of or compensation for an injury or handicap;
- investigation, replacement or modification of the anatomy or of a physiological process;
- control of conception;
and which does not achieve its principal intended action in or on the human body by pharmacological, immunological or metabolic means, but which may be assisted in its function by such means.
While spare and replacement parts remain complementary to medical devices, as such they are not medical devices. Moreover, the MDA does not provide any separate definition for such parts. Therefore, as a distinct category of products not falling within the statutory definition of medical devices, they cannot benefit from the reduced VAT rate and thus shall be taxed under the standard rules at a rate of 23%, unless they are listed under other items in Schedule 3 of the VAT Act.