On 24 August 2018, the Polish Administrative Court issued the first judgment (case no. III SA/WA 3486/17) confirming the possibility to recover input value added tax (VAT) by Polish branches, in cases where such branches provide services for the VAT group's headquarters (HQs).

The Polish court ruling follows the Court of Justice of the European Union (CJEU) judgment in the Skandia case, which held that services provided by the main establishment of a company (located in a third country) to a branch of a company (located in a Member State) are taxable transactions if the branch is a member of a VAT group (a group of persons that can be considered as a single taxable person within value added tax). Hence, the CJEU confirmed that the main establishment of a company and its branch may be treated as separate VAT taxpayers.

Taking into account the Polish Administrative Court's ruling, the following implications should be considered:

• Activities performed by a Polish branch for the benefit of its HQ – member of a VAT group – are transactions subject to VAT taxation.
• There should be a right – under general rules – to deduct input VAT related to purchases made by the Polish branch in connection with those activities performed for the benefit of HQ.
• Activities performed by an HQ – member of a VAT group – for the benefit of its Polish branch may trigger an obligation to account for Polish VAT (under the reverse charge mechanism).

———————————————
CONTACTS

For additional information with respect to this Alert, please contact the following:

EY Doradztwo Podatkowe Krupa sp. k., Warsaw

• Dorota Pokrop
  dorota.pokrop@pl.ey.com
• Agnieszka Owsiak
  agnieszka.owsiak@pl.ey.com
• Mateusz Machalski
  mateusz.machalski@pl.ey.com

———————————————
ATTACHMENT

PDF version of this Tax Alert