Polen/ Branches Under the New VAT Law

Starskies2000 · Insider Anmeldungsdatum: 15.09.2003 Beiträge: 910 Wohnort: NRW

The applicability of Polish VAT law to foreign entities has always been a controversial subject.

Under the 1993 VAT Act, everyone who performed VAT activities on a regular basis was considered a VAT taxpayer. The law did not refer to the place of the entity’s incorporation. If a foreign entity regularly sold goods or performed services in Poland it was subject to Polish VAT and had to register as a VAT taxpayer.

In practice, from the end of the ‘90s such registration was not possible. Tax offices asked foreign entities to provide the same data as Polish entities. This included a REGON number, a Polish address and a Polish bank account. Specifically, a REGON number was never provided by foreign entities and based on this argument tax offices refused registration.

The only way in which foreign entities could be registered for VAT purposes was through a branch in Poland. This was never controversial. A branch of a foreign entity, registered in Poland, with an office and all the relevant numbers, was treated by tax authorities in the same way as Polish incorporated entities.

EU accession and related VAT law changes were supposed to eliminate any doubts and allow every entity conducting business activity to register for VAT purposes. However, as usual in the case of Polish tax law, the new regulations are unclear and cause many misunderstandings.
The new VAT law states that effective May 1, 2004 branches may no longer be independent VAT taxpayers. The law, however, does not specify what branches. In the Polish legal environment, we may have a branch of a foreign entity registered in Poland, but also a self-financed branch of a Polish entity. In practice, large Polish enterprises conducting business activity nationwide and having many places of business, often had several branches that were separate VAT taxpayers. For example, supermarket chains operate in this way, with each supermarket a separate VAT taxpayer.

The new wording of the VAT law invites misunderstandings and inconsistent interpretations. The purpose of the new regulations was to eliminate situations in which one legal entity being a CIT taxpayer could accordingly be treated as several separate VAT taxpayers. However, the direct understanding of the quite simple and straightforward wording of the new VAT law leads to the conclusion that existing branches of foreign entities may no longer be registered as VAT taxpayers. But such interpretations seem strange and completely against the idea of EU Directive VI.

Employees of different tax offices present an unanimous opinion that the new regulations do not relate to branches of foreign entities. Even more, they have been registering the branches of foreign entities for VAT since May 1, 2004. So is there any problem? On the one hand, we might say that there is no problem as foreign entities do not face difficulties registering their branches for Polish VAT purposes. But on the other hand, the law clearly states that a branch may not be registered for VAT. One tax officer may read it as it stands in the law and refuse the registration. This may lead to a dangerous situation in which entities of the same character are treated differently without justification.

As mentioned above, the purpose of the new legislation was to eliminate situations in which one legal entity is accordingly treated as more than one VAT taxpayer. Branches of foreign entities are only practically and structurally separated from the company; in fact they are always one entity. A branch is more like an office in another town than an independent entity. Whatever the branch does, it does in the name of and on behalf of the company. It may undertake only such activities as the head office has in its status. A foreign entity and its branch are united from the legal point of view. The same applies to branches of Polish entities. However, with respect to VAT, the difference is significant.

Registration of a branch of a Polish company results in two separate VAT taxpayers in Poland. Registration of a branch of a foreign entity for Polish VAT purposes means that in fact the foreign entity has been registered and that it operates in Poland, but through its branch. Reading the new VAT law directly we may argue that in fact the registered foreign company and its branch are united in the legal perspective. From a practical point of view, it will be the branch and its director, who will be dealing with all the registration procedures. But formally it will be just one entity which obtained the status of VAT taxpayer in Poland.

There is one situation in which the new VAT law might affect the branches of foreign entities. It is not common; I would even say that most probably such a situation is unique to Poland, but theoretically it may happen. If a foreign entity was a registered VAT taxpayer before May 1, 2004 and also the branch was registered for VAT purposes and received a separate NIP number, then the new VAT law affects these VAT taxpayers. After May 1, 2004 they may no longer be both registered for VAT. The branch should be deregistered.

We may imagine a situation in which a tax officer misinterpreting the law tells the accountant of UL Ltd Branch in Poland that this entity should deregister as it may no longer exist as a VAT taxpayer. I don’t think such situations should be commonplace, yet we cannot eliminate such a risk altogether. The arguments against such a request should be based on the fact that it is a foreign entity which is registered for VAT purposes and that it operates only through the branch, which is an integral part of this entity. Regardless of the name on the VAT declaration (with or without the word “branch”), there is only one entity registered for VAT purposes. There is no point in deregistering a branch and immediately registering the head office. It would only waste the time of everybody involved. However, we may hope that before some taxpayer indeed faces such difficulties, the Ministry of Finance will issue an official interpretation or at least internal guidelines for tax offices, and the current doubts will disappear.

Paulina Pilch
The author is a tax adviser
at TGC Tax Advisers Sp. z o.o.

Trader · Insider Anmeldungsdatum: 28.10.2003 Beiträge: 931 Wohnort: Weesen

@starskies

Wieder mal ein schönes Beispiel für lebendige polnische Bürokratie - was solls, man muss es einfach lieben ansonsten würde man verzweifeln...

Gut die Texte; ähnliche hatten Sie ja andernorts auch schon eingestellt. Wo kann ich die besorgen oder runterladen?

Sind auch für mich recht nützlich.

Grüsse
Trader