Chain transactions in VAT - new rules, old risk

June 23, 2020 Poland

Beginning from 1 July 2020, new regulations regarding the taxation of the so-called chain transactions will come into force in Poland.

What are chain transactions?

A chain transaction occurs when goods are sold successively by several sellers, but their transport takes place only between the first and last entity in the chain.

Correct taxation of a chain transaction requires the taxpayer to recognize a mobile delivery – which can be 0% VAT taxed. All transactions preceding the mobile delivery must be taxed in accordance with the regulations of the country of dispatch, and those following the delivery - with the regulations of the country of destination.

What is changing?

The new regulations provide for simplification in the settlement of transactions between EU countries - delivery to an intermediary who arranges transport and does not use the VAT number of the country of dispatch will be considered as a mobile delivery. However, the existing rules will continue to apply to chain transactions with third countries.

Risk of incorrect taxation

Correct taxation of chain transactions has always been difficult for taxpayers and, in our experience, in a few cases, they were settled for correctly. This situation is particularly risky for entities that participate in chain transactions with more than 3 entities or carry out these transactions in a capital group.

Our proposal - review, and preparation of procedures

The new regulations mean the need to adapt the company's procedures to new regulations. But not only. It is also an opportunity to review the correctness of existing accounts and implement recovery processes. Our tax team can help with this:

  • We will review chain transactions for their correct application,
  • We will prepare a report with our conclusions and recommendations,
  • We will prepare chain transaction settlement procedures according to new regulations, taking into account the specificity and capabilities of the customer.

Our study can also be extended to analyze the correctness of applying preferential forms of taxation in cross-border transactions (intra-Community supply of goods, the export of goods, delivery with installation, work on entrusted material, etc.).

Łukasz Bączyk
Head of Tax, Board Member
E: lbaczyk@asbgroup.eu

Jarosław Szajkowski
Tax Manager - Tax Adviser
E: jszajkowski@asbgroup.eu