Entrepreneurs often buy machines abroad. In practice, the seller provides assistance in its launch and implementation, often sending a team of specialists from abroad.
Entrepreneurs often forget that on the basis of value added tax (VAT), such a transaction may be accounted for as one of two taxable activities: intra-Community acquisition of goods (ICA) or delivery with assembly.
Delivery with assembly is a different “form” of settlement of cross-border commodity delivery than ICA.
In practice, both activities are settled on the “reverse charge” basis, but there are also differences, such as different declaration rules.
According to Art. 22 sec. 1 point 2 of the VAT Act, the place of delivery of goods is, in the case of goods that are installed or assembled, with or without a trial run, by the person delivering them or by an entity acting on his behalf, the place where the goods are installed or assembled; the installation or assembly of simple operations enabling the assembled or installed goods to function in accordance with their intended purpose are not considered.
The delivery of goods together with the assembly does not constitute intra-Community acquisition of goods (Article 10 sec. 1 point 3 letter b of the VAT Act).
In the case of delivery of goods with assembly, the taxpayer for this activity is the Polish buyer (pursuant to Article 17 sec. 1 point 5 of the VAT Act). As indicated, it is here that he settles both input and input VAT.
Importantly, this type of settlement is not used, e.g. in a situation where the supplier has a fixed establishment in Poland, or is registered for VAT in Poland.
The criterion for distinguishing when we are dealing with ICA and when we are dealing with the delivery of goods with assembly concerns the nature of the activities performed by the supplier.
The interpretations of tax law indicate that it is important that the supplier’s activities require certain specialist knowledge and be more complicated than simply bringing to functionality. This also applies to the supervision or management of the supplier in the assembly / commissioning process.
Provision of assembly / commissioning as part of this activity should not be accounted for as import of services.
In addition to the issue of a separate declaration of delivery of goods with assembly, it is important that the tax obligation for this activity arises on different terms than for ICA.
Pursuant to Art. 20 sec. 5 of the VAT Act, the tax obligation in the intra-Community acquisition of goods arises at the moment of issuing an invoice by the taxpayer of value added tax, but not later than on the 15th day of the month following the month in which the goods being the subject of intra-Community acquisition were delivered. Earlier payment, in particular in the form of an advance payment, is tax-neutral.
These issues will be presented differently in the scope of delivery of goods with assembly. The provisions of the VAT Act do not provide for a specific tax point in the case of delivery of goods with assembly. Therefore, the tax obligation for the delivery of goods with assembly arises upon the delivery, i.e. the transfer of the right to dispose of the goods as the owner.
In practice, it is important to be guided here by the actual moment of delivery and commissioning. The tax authorities emphasize that the date of the handover protocol should not be entered here, if it is different than the above-mentioned date.
In a situation, where the delivery is preceded by the payment of an advance / prepayment, the tax obligation arises upon receipt of this advance in relation to the received amount.
Such an approach is represented in individual interpretations, cf. e.g. the interpretation of the Director of the National Tax Information of March 2, 2020, ref. 0113-KDIPT1-2.4012.718.2019.2.KT.
Similarly as in the case of intra-Community acquisition of goods, settlement on the delivery date should also apply to the part of the remuneration that would be invoiced only after delivery (i.e. as a subsequent invoice to the “basic” invoice).
In practice, in order to correctly settle the delivery with assembly, it is worth considering the following activities:
- identifying at the procurement stage which of the activities may generate settlement on the basis of delivery and assembly;
- introducing a new code into the accounting system, which would be dedicated to the acquisition of machines from abroad, where the supplier will provide their assembly;
- in the field of intra-Community acquisition of goods, uniform recognition of the entire tax base on the date of issuing the invoice documenting intra-Community acquisition of goods (taking into account the amounts of advance payments and subsequent payments);
- introducing appropriate, i.e. taking into account the above-mentioned issues, provisions to the tax procedures functioning at the taxpayer’s.