Intra-Community Delivery and Export Correction

Intra-Community Delivery

This document outlines the procedures for booking necessary adjustments/entries pertaining to VAT correction in the context of Intra-Community Delivery and the Export of Goods outside the European Union member countries.

For taxpayers settling VAT on a monthly basis, the rule is to include the ICD transaction in the tax return submitted for the period in which the tax obligation in this respect arose. As a rule, this obligation arises when the taxpayer issues an invoice, but no later than on the 15th day of the month following the month in which the delivery was made (Article 20(1) of the VAT Act). The date of receipt of the advance payment or prepayment for this transaction is not important to determine the date when the tax liability for ICD arises.

However, the 0% rate cannot be applied if the taxpayer did not show the transaction in the EU VAT sales list or showed it incorrectly (unless he duly explained the omission in writing to the head of the tax office).

Subsequent receipt of evidence confirming the intra-Community transaction makes it necessary to include the intra-Community transaction also in the declaration for the settlement period in which the tax obligation arose, but by submitting a correction to this declaration.

However, if a taxpayer settling VAT for monthly periods does not receive the required documents by the deadline for submitting a tax return for the third consecutive month from the date of delivery, then the taxpayer is obliged to tax the supply of goods at the national VAT rate. This is what Art. 42 section 12 and section 12a of the VAT Act.

Sample Scenario and Corresponding Bookings in Netsuite

• On August 28, 2023, Polish tax payer made a Intracommunity delivery of hardware for an EU buyer. On the same day, he issued an invoice for EUR 100,000.

• For VAT, income tax and balance sheet purposes, the invoice value was converted into PLN at the average exchange rate on the day preceding the sale, i.e. at the exchange rate of PLN 4.4716/euro (table of NBP of August 25, 2023 ). The value of revenue amounted to PLN 447,160 (EUR 100,000 x PLN 4.5758/EUR).

• Let's assume that the taxpayer will receive documents confirming Intracommunity delivery only on December 10, 2023. The taxpayer did not report the sale of goods in JPK_V7M with the declaration for August and September 2023. This transaction as a domestic sale is obliged to be reported in JPK_V7M with the declaration for October 2023. In Poland, goods are subject to taxation at a rate of 23%. The amount of tax  amounted to: (PLN 447,160 x 23%): 123% = PLN 85,563.74.

• Receiving documents confirming the intracommunity delivery entitles the taxpayer to submit a JPK_V7M correction in December 2023 with the declaration for August 2023 ("in plus" correction) and for October 2023 ("in minus" correction)

The following journal entry illustrates the anticipated transaction for posting in Netsuite, capturing events related to incorporating in the accounting books an intra-community delivery not meeting the conditions for taxation at a 0% rate:

Sale invoice – Intracommunity delivery of hardware account (100,000 euro x 4.4716 PLN/euro)

August 2023:

• This will be recorded as standard sales invoice

• This will not appear in the JPK_V7.

Journal Entry Posting - Correction of Sale invoice as it doesn’t meet the requirements for Intracommunity delivery of hardware account, Evidence is not obtained on third consecutive month from the date of delivery (100.000 euro x 4.4716 PLN/euro)

November 2023 if posting for October is closed:

Open

The Sales/Income account to be used for posting must be reclass from Intracommunity Delivery Account to Domestic Delivery.

Open

The taxpayer which made a supply of goods for which tax liability arose in August 2023, but did not receive evidence confirming the IDC delivery by the deadline for submitting the declaration for October 2023, i.e. November 25, 2023, then he or she is obliged to report the delivery in JPK_V7M with the declaration for October this year, as a domestic supply taxed at the VAT rate applicable to the given goods

JPK V7 Impact for October correction in November period

Journal Entry Posting - Correction of the supply of goods made in connection with the receipt of documents confirming the right to be taxed at 0% (100.000 euro x 4.4716 PLN/euro)

Postings in December 2023 if documentation provided:

The Sales/Income account to be used for posting must be reclass from Intracommunity Delivery Account to Domestic Delivery.

JPK V7 Impact for October correction in December period

Journal Entry Posting - JPK correction needed (correction should be done in December with retro-activeness to October). Inserting this transaction into VAT register and JPK August as intracommunity delivery with tax rate 0%

JPK V7 Impact for August correction in December period

Additional Note:

The tax authorities allow for a situation in which the taxpayer, already for the period of issuing an invoice for the supply of goods, will show this supply in the sales records and JPK VAT as a supply within the territory of the country, with a rate of 23%. This will happen when the taxpayer knows in advance that he will not have documents confirming the export of goods to another EU Member State, entitling him to the 0% rate, within the required deadline. Confirmation of this position can be found in the individual interpretation of the Director of KIS of August 5, 2021 (0111-KDIB3-3.4012.211.2021.2.PJ). The tax authority found it appropriate to act on the part of the taxpayer who, knowing in advance that before submitting JPK VAT for a given settlement period, would not have evidence that the goods being the subject of an intra-Community supply were exported from the territory of Poland and delivered to the buyer in the territory of another Member State (the delivery is not immediately accompanied by the export of the goods, their shipping time is not known and the goods are in the seller's warehouse), he showed this delivery in the sales records and JPK VAT as a delivery within the territory of the country, with a rate of 23% on the date of issuing the invoice, and only after receiving the relevant documents, he corrected the declaration in accordance with Art. 42 section 12a of the Act.

Export of goods

The VAT 0% rate for the export of goods applies provided that the taxpayer has, before the deadline for submitting a tax return for a given settlement period, a document confirming the export of goods outside the territory of the European Union (Article 41(6) of the VAT Act). If the taxpayer does not have this confirmation, he or she may report export sales with a 0% rate in the settlement for the next period, provided that he or she has a document confirming the export of the goods before the deadline for submitting the declaration for the next settlement period (Article 41, paragraph 7 and paragraph 11 of the VAT Act). If the taxpayer has not received this document also by this second deadline, national VAT rates apply.

Receiving documents confirming the export of goods at a later date (after showing the export of goods as a domestic supply) entitles the exporter to adjust the domestic sales with the tax shown in the settlement for the period in which he received these documents. The basis for the correction are the provisions specified in Art. 41 section 9 and section 11 of VAT Act.

Deadline for correcting the export delivery due to the lack of documents confirming the right to the 0% rate

Sample Scenario and Corresponding Bookings in Netsuite

• In September, the company made an export of goods on EXW (Ex - Works) terms. On September 11th 2023, the goods were released to the carrier and an invoice for USD 60,000 was issued on the same day.

• Revenue from the export of goods for accounting balance sheet purposes, income tax and VAT purposes was converted into PLN at the average NBP exchange rate from September 8, 2023, which was PLN 4.3077/USD. Its value was PLN 258,462 (USD 60,000 x PLN 4.3077/USD).

• The document confirming the export of goods outside the EU was received by the company on December 1, 2023 (after the deadline for submitting the tax return for the month following the month of export). The company is obliged to report delivery of goods (export) as domestic sales taxed at 23% in the JPK_V7M declaration for October

Sales invoice – sale of goods as export of goods (60,000 USD x 4.3077 PLN/USD)

August 2023:

• This will be recorded as standard sales invoice

• This will not appear in the JPK_V7.

Journal Entry Posting - sales correction due to lack of documents confirming export delivery

Postings in November 2023 if posting for October is closed:

The Sales/Income account to be used for posting must be reclass from Export of Goods Account to Domestic Delivery.

JPK V7 Impact for October correction in November period

Journal Entry Posting - Correction of the supply of goods made in connection with the receipt of documents confirming the right to be taxed at 0%

Postings in December 2023 if documentation provided:

JPK V7 Impact for October correction in December period

Posting after Receipt of Evidence for Export of Goods outside EU Later than the Above Posting (at 0%)

When receiving export documents in December, a reverse transfer of revenues must be made, which also results in a correction (reduction) of the tax due from domestic transaction to export with rate 0%.

JPK Impact