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16 December 2019

Applying the 0% VAT rate for WDT

The amendment regarding the rules for granting the 0% rate for WDT (intra-Community transactions) is part of the package of amendments to the VAT Act, the so-called VAT quick fixes, proposed by the Ministry of Finance in June 2019. The new rules introduce a substantive obligation to use the VAT identification number and submit VAT-EU summary information. The changes will enter into force at the beginning of 2020.

Legal status valid until the end of 2019

WDT transactions are sales of goods by active VAT payers, delivery of goods to contractors from the European Union. According to the current regulations in force until the end of 2019, providing the supplier’s and buyer’s VAT identification number during this type of transaction is only a formal obligation. This means that the buyer can obtain a VAT exemption (0% instead of the domestic 23% rate) without having to provide valid VAT identification numbers. The tax office does not currently have legal tools to raise the VAT rate to the national rate of 23% based on the lack of an active VAT number. The taxpayer protects the taxpayer against the intervention of favorable decisions of the Court of Justice of the European Union.

A similar rule applies in the case of the obligation to submit VAT-EU summary information. The VAT-EU declaration serves mainly statistical purposes, not settlement – its failure to submit goods for sale to EU countries does not involve financial sanctions or the risk of raising the VAT rate.

0% VAT rate for WDT – new responsibilities

From 2020, the requirement to provide the supplier with a valid VAT identification number and the need to submit VAT-EU for WDT transactions will become substantive obligations. In other words: the buyer and supplier not only need to sign in active VAT numbers (thus there is a need to verify the validity of the number), but are also obliged to include them on the sales invoice and other evidence of intra-Community transactions.

The second issue is the inclusion of transactions in the VAT-EU recapitulative statement, and in this matter, the new regulations also introduce a material requirement. In the case of VAT-EU declarations, however, there is the possibility of arguing the lack of submission of a summary to the tax office. With the help of such inference we can fight the withdrawal of the VAT rate increase to 23%, although this applies only to exceptional situations, such as unintentional participation in a crime. Summary VAT-EU information should be submitted for one month by the 25th day after the month to which the tax liability relates.

The new regulations apply to both buyers and suppliers involved in WDT transactions.

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