Do you buy services abroad? Remember about VAT

April 5, 2024

Many entrepreneurs purchase various kinds of services from entities that are based outside of Poland. What do you have to remember when settling invoices for these services? – a few pointers below.

Mysterious “reverse charge”…

The general rule is that if a Polish entrepreneur purchases services from a foreign entity, they are obliged to settle VAT independently according to national rules – we will mention a few exceptions below.

Invoices issued by a foreign service provider generally do not include VAT and include the words “reverse charge”. This phrase is nothing more than an indication of the “reverse charge” procedure, i.e. the obligation to settle VAT by the Polish purchaser of the service – also often referred to as “import of services”.

What are the VAT rates for foreign services?

If a Polish taxpayer receives an invoice for a service from a foreign partner, they are required to charge VAT based on the applicable VAT rate in Poland for that specific service.

This means that if we purchase an advisory service from a foreign contractor, we must charge VAT at a rate of 23%, as this is the rate that would be applied by a Polish taxpayer providing the same type of service. However, if we purchase an insurance intermediation service from a contractor outside of Poland, we should apply VAT exemption (i.e. the “zw” rate) to settle the “import of services”, as this is how this type of service is taxed in Poland.

Services purchased abroad: when to settle VAT?

It is important to remember when we need to settle VAT. The rules applicable to domestic transactions should be followed. The date of actual performance of the service is crucial and may be indicated directly in the invoice or provided by the contractor.

And a few exceptions

As is usually the case in taxes, there are several exceptions to the above-mentioned rules for settling services purchased from foreign contractors.

If you purchase the services indicated below, we are not obliged to settle VAT in Poland (invoices issued by a foreign supplier will include the local VAT rate and tax amount).

• Services related to real estate – rental, services of advisors, appraisers, real estate agents, hotel services, preparation and coordination of construction works, services of architects and construction supervision – are taxed in the place of the actual location of the property.
  
• Services related to admission to cultural, artistic, sports and scientific events – are taxed where these events take place.
  
• Services related to culture, science, art or sports – are taxed where such activities are carried out.

Tags reverse charge, services abroad, vat