Commission Refers Poland To ECJ

by Ulrika Lomas, Tax-News.com, Brussels

18 May 2009

The European Commission has decided to refer Poland to the Court of Justice regarding the application of VAT to cross-border passenger transport services supplied by buses registered abroad.

According to the VAT Directive, cross-frontier transport services are subject to VAT in each Member State for the distance travelled therein. Poland has introduced a particular VAT scheme for cross-border passenger transport services supplied on an occasional basis by means of buses registered abroad. This scheme, which applies to the part of the transport taxable in Poland, entails basically the following:

• the bus driver is asked to pay the tax in a customs office when the bus enters Poland;
• the amount of the tax is established for each passenger at 7% of PLN285 (USD85):
• the transport company is not allowed to recover any VAT borne in Poland.

Thus, the scheme leads to VAT due in Poland being collected through payment at the border of an amount calculated on the basis of an average taxable amount per traveller. This scheme deviates from the Community rules since, according to the VAT Directive:

• VAT due by the supplier of the transport service must be declared and paid by means of a VAT return and not through a one-off payment at the border;
• the amount of the tax due results from the application of the VAT rate to the part of the total consideration paid for the transport service which is proportional to the distance travelled in Poland;
• the transport company must be allowed to deduct VAT borne in Poland in the periodical return.

Furthermore, the Polish provisions lead to fiscal cross border controls, thus contravening the essential principles of the internal market.

The Commission sent a reasoned opinion to Poland in June 2008 (see IP/08/1027). As Poland has not amended its legislation within the time limit laid down, the Commission has decided to refer the matter to the Court of Justice.

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