Commission Takes Poland To Task Over VAT Rules

by Ulrika Lomas, Tax-News.com, Brussels

04 March 2008

The European Commission has formally asked Poland to bring its legislation on the application of certain VAT rules on the supply of services into line with the provisions of the VAT Directive.

The request, lodged last week, takes the form of a reasoned opinion, which is the second step of the infringement procedure provided for in Article 226 of the EC Treaty. If, within two months, the relevant national provisions are not amended so as to comply with the reasoned opinion, the Commission may decide to refer this matter to the European Court of Justice.

Correct transposition by EU Member States of the VAT rules governing the place of supply of goods and services is essential to avoid cases of double taxation (or non taxation) within the EU, the Commission explained.

According to the provisions of the VAT Directive, "cultural, artistic, sporting, scientific, educational, entertainment or similar activities, including the activities of the organizers of such activities, and where appropriate, ancillary services" are located at the place where the services are physically carried out.

In its transposition of this provision, the Polish VAT law has omitted any mention to the category of "similar or ancillary activities". The Commission therefore considers that the Polish legislation has a narrower scope than that of the VAT Directive.

In addition, according to the VAT Directive, where certain conditions are met, "services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, as well as data processing and the provision of information" are to be located where the customer is established.

The Commission considers that Poland has not adequately transposed the latter article into national legislation for the following reasons:

• Certain categories of services comprised within the provision (such as those of consultancy and engineers) are defined in the Polish VAT Law according to an internal statistical classification of goods and services, only applied in Poland and not in other Member States;
• The category "other similar services" does not appear in the Polish legislation;
• The reference to "services of consultants" and "services of consultancy bureaux" in the Polish VAT Law is narrower in scope than the one contained in Article 56(1)(c) of the VAT Directive, since it refers to specific kinds of consultancy, such as consultancy related to computer equipment or to software.

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