Part 1 Chain transactions

Legal framework

On August 11, 2021, the Sejm passed the act containing, in principle, another package of simplifications in VAT settlement. It was named, in reference to the changes in regulations from the beginning of the year, SLIM VAT 2. Some of the regulations entered into force on September 7, most tax regulations are in force from October 1, 2021, and only a small part will enter into force on January 1, 2022.

On 1 July 2020, the so-called package of quick fixes came into force, where, inter alia, an attempt was made to tidy up the rules of determining the place of provision. As can be seen, this has not been entirely successful and all possible configurations of such deliveries have not been regulated, of which the proposed Article 22(2e) is an excellent example:

In the case of goods referred to in paragraph 2 which are dispatched or transported from the territory of the country to the territory of a third country or from the territory of one Member State to the territory of another Member State by:

1) the first supplier, the dispatch or transport shall be attributed to his supply;

2) the last customer – the dispatch or transport shall be attributed to the supply made to that customer.

This provision complements the regulation of Article 22(2a), which and currently provides that in the case of goods referred to in paragraph 2, which are dispatched or transported from the territory of the country to a third country by a purchaser who also supplies them, the dispatch or transport shall be deemed to be attributed to the supply made to that purchaser, unless it follows from the terms of the supply that the dispatch or transport of the goods is to be attributed to his supply, and to paragraph 2b:

In the case of goods referred to in paragraph 2 which are dispatched or transported from the territory of one Member State to that of another Member State, the dispatch or transport of those goods shall be attributed solely to the supply made to the intermediary.

To these regulations it is also worth adding:

Article 22(2c) indicating that the use by the intermediary of the VAT number allocated in the country of the first supplier makes his supply a movable supply.

Article 22(2d) explaining that the intermediary is that entity, other than the supplier of the goods, which dispatches or transports the goods itself or through a third party acting on its behalf – but only for intra-Community transactions.

Purposes

The new paragraph 2e will therefore be a special regulation in relation to both of these provisions, depending on whether the goods will eventually be transported to another EU Member State or to a third country, to paragraphs 2a and 2b respectively, taking into account paragraph 2d, which however in fact deals with a different situation.

At first glance, it is probably intended primarily to clarify the situation where there are more than 3 operators in the supply chain (which the quick fixes were very much accused of), but in fact it will also apply to this simpler situation.

Since the provisions, both the current one and the proposed one, do not sin with regard to the principles of correct legislation in terms of, above all, readability, it is worth tracing them by means of examples.

In practice

Thus:

Example 1

Goods go from Poland to Ukraine, with Czech and Slovak entities in the supply chain as the second and third supplier in the chain respectively. The example considers 4 entities at once to show the impact of the proposed provision or lack thereof.

Thus:

1. (a) If the transport is organised by a supplier from Poland, his supply is a mobile supply, benefiting (potentially) from the preference provided for exports. Supplies of CZ and SK taxpayers are immovable and due to the place of supply in Ukraine remain outside the scope of EU and Polish VAT. Without the proposed regulation this would not be clear and would only result from the interpretation made by the EU CJ even before the quick fixes.
2. (b) If the transport is organised by the taxable person CZ, then he is an intermediary. The proposed rule does not apply to him at all, but according to paragraph 2a, from which it follows that also in this case the movable supply is the supply of the taxable person PL.
3. (c) If transport is organised by a taxable person SK, he is an intermediary. The proposed rule does not apply to him at all but in accordance with paragraph 2a, from which it follows that also in that case the movable supply is the supply of taxable person CZ.
4. d) If the transport is arranged by the purchaser UA, in this case the movable supply is the supply of taxable person SK. Without the proposed rule, under paragraph 2a only, this was also not entirely clear, but also based on the case law it was assumed that the movable supply is the supply made to that entity, i.e. the supply of the last chain supplier.

Example 2

Goods are going from Poland to Cyprus, with Czech and Slovak entities in the supply chain as the second and third suppliers in the chain respectively.

Thus:

1. (a) If the transport is organised by a Polish supplier, his supply is a mobile supply which (potentially) can benefit from the preferences provided for intra-Community supplies of goods (ICT).
2. b) If transport is organised by a CZ taxable person using a non-Polish VAT number then the supply to him (i.e. the supply of the PL taxable person) is a movable supply.
3. (c) If transport is organised by taxable person CZ using a Polish VAT number, his supply (i.e. the supply of taxable person SK) is a movable supply.
4. d) If transport is organised by taxable person SK using a non-Polish VAT number, he is deemed to be an intermediary, so in the light of the rules in force (paragraph 2b in conjunction with paragraph 2d) the supply of the movable supply will be that of taxable person CZ.
5. (e) If transport is organised by taxable person SK using a Polish VAT number, his supply (i.e. the supply of taxable person CY) is a movable supply.
6. (f) If transport is arranged by taxable person CY, his supply (i.e. the supply from taxable person SK) is a movable supply.

  Conclusion As can be seen, the new rules primarily deal with the situation where transport is organised by the first supplier or the final purchaser, which should eliminate doubts on this point and above all the need to refer to case law. These provisions do not address the situation of intermediaries at all, which, according to some doctrine representatives, would cause problems in the case of a larger number of such entities. Thus, in this respect they are yet another quick fix to the VAT system, probably incomplete rather than simplification – which cannot be said about the other changes in the Slim VAT2 package, which I will discuss in the following materials.

This post is also available in: PL