VAT warehouse

The Polish Ministry of Finance has initiated works on the implementation of the concept of the VAT warehouse into the Polish legal system. The said initiative is to introduce crucial simplifications in scope of settlement and collection of value added tax for taxpayers who conduct business activity in the area of international trade of goods.

Definition of “VAT Warehouse’’  

The term of VAT warehouse is already known in the EU legislation. The current regulations in the European Union provided for in Directive of the Council 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347 of 11.12.2006, p. 1, with amendments, referred to in this article as: the VAT Directive) have already been allowing the introduction of solutions the purpose of which is to exempt certain transactions related to international trade of goods from VAT.  

A “VAT Warehouse” should be understood as a customs warehouse referred to in Art. 242 section 1 of the Union Customs Code (type I customs warehouse) – excluding excise goods (excise goods will not be subject to the VAT warehouse procedure), managed by an “entity managing a VAT warehouse” that received a permission to manage a VAT warehouse.   

In order to utilize the procedure of the VAT warehouse, the following conditions must be met: 

1. The entrepreneur received a permission to keep a VAT warehouse issued by the head of the customs and tax office. The permission is issued indefinitely and applies only at the place where the customs warehouse is managed. However, in order to receive the permission, the following conditions must be met:

• status of an active VAT payer for at least 12 months; 

• the person managing the entity’s operations, their attorney, representative or beneficial owner must not be convicted under a final judgment court judgment for a crime against credibility of documents, against property, against economic trade, against trade in money or securities, or for a fiscal crime as well as must not be subject to a prohibition of economic activity; 

• good financial situation of the company (no risks within the scope of fulfillment of tax obligations); 

• no arrears within the scope of customs and taxes that constitute the income of state treasury, contributions to social and health insurance, as well as no pending enforcement, liquidation or bankruptcy proceedings; 

• no relationships with entities that have their registered office in countries specified in the Ordinance of the Minister of Finance on determination of countries and territories that apply harmful tax competition in terms of corporate income tax; 

• annual financial statements subject to audits performed by a statutory auditor.  

2. The entrepreneur is obligated to keep electronic records of goods entered in, taken out from and stored at the VAT warehouse. The VAT warehouse records will be subject to the supervision of the head of the customs and tax office and should be kept separately for every taxpayer who received the permission to apply the VAT warehouse procedure.  
3. The entrepreneur was granted a permission to use the VAT warehouse for specific goods. This permission is issued for a specific period by the head of the customs and tax office upon the taxpayer’s request.
4. The entrepreneur applies the VAT warehouse procedure to goods that were entered into and reported for the VAT warehouse procedure. The goods will be unavailable for further sales of goods until the VAT warehouse procedure is complete.

Customs and tax authorities also indicated the scope of permitted activities that can be carried out on the goods covered by the procedure. At a VAT warehouse, we can: enter goods to the warehouse, store the goods, provide services directly connected to the stored goods, and take goods out from the warehouse.   

The scope and conditions of application of the 0% rate 

Provision of services at the VAT warehouse which are directly related to the goods covered by the VAT warehouse procedure is subject to a VAT rate of 0%. The concept does not provide for implementation of Art. 160 section 1 letter b) of the VAT Directive within the scope of tax exemption (0% rate) for deliveries of goods covered by the procedure of “a warehouse other than the customs warehouse” (VAT warehouse). The said deduction will be available in a situation when the taxpayer issued an invoice that documents a delivery with the use of the KSeF system, identified the legal basis of the used 0% rate on the invoice and then entered the goods to the VAT warehouse and received a document confirming that the goods were covered by the VAT warehouse procedure from the purchaser. Fulfillment of the said delivery will be understood as completion of the VAT warehouse procedure.  

However, the ministry also provided for cases of responsibility for the tax outcomes in relation to losses that occurred at the VAT warehouse. The concept stipulates that goods losses will be considered as goods taken out without reporting the completion of the VAT warehouse procedure, and the said action will be subject to tax. The entity obligated to pay the VAT on losses will be the taxpayer that owns the goods (the entity specified in the records kept at the VAT warehouse).  

Settlement of VAT after a completed VAT warehouse procedure 

The payment obligation regarding the payable VAT tax will, in general, apply as a result of the notification sent by the taxpayer that the VAT warehouse procedure had been completed. It results from the fact that the payment obligation of VAT will be imposed on the person that makes the goods no longer subject to the VAT warehouse procedure. For the taxpayer, the paid tax will constitute charged tax subject to deduction as part of the JPK_VAT declaration.  

The introduction of the VAT warehouse can be particularly beneficial for entrepreneurs who acquire goods in Poland in order to resell them in other countries. Usually, it will refer to goods that are only stored in Poland or are the subject of provided services. In such situations, the taxpayer will not be able to settle the charge VAT in Poland and expect a refund. The concept of the VAT warehouse will also bring advantage to suppliers who will be able to use the 0% rate.   

Author: Sara Waszczyńska VAT Specialist at the accounting firm in Katowice