Replacing paper declarations with Standard Audit File or abandoning traditional tax records was only the beginning of the e-revolution. Both our approach to monthly VAT Compliance processes and the scope of information provided to tax authorities have changed. The Fiscal Administration knows more about us and our businesses. This time, however, it is the Ministry of Finance and the tax office competent for settling VAT under the special One Stop Shop procedure who had to cooperate to adapt their internal systems to the business reality of taxpayers.
In 2021, after the breakthrough Brexit, one of our clients chose Poland as the so-called country of identification for VAT settlements on services provided in one of the simplified OSS procedures. Pursuant to the pan-European regulations, a taxpayer from a third country may settle VAT under the union OSS procedure on electronic B2C services if they have a fixed establishment in the territory of the country of identification.
Unfortunately, in 2021 OSS registration forms in Poland were not ready for post-Brexit. The VIU-R electronic forms available at that time provided that the UK was still a Member State. Following the recommendation of the Ministry of Finance, the taxpayer was registered thanks to the provisional solution where its country of establishment was filled out in the “Name of the entity” section. Many tax settlement periods later, when the relevant forms were updated by the Ministry, we submitted to the tax office an update in this respect. However, the facts remained the same. The taxpayer had its registered office in the UK and this location has not changed for the last 2 years.
However, after sending the first OSS return after the update, we received an e-mail with information about its rejection. It turned out that the ministerial system does not cover all the scenarios referred to in the regulations known to us widely as the so-called "E-commerce package". According to the system, a non-EU taxpayer could submit its returns only under the non-union OSS procedure, as information about a fixed establishment in our country could not be recorded properly. The system had significant loophole in this respect and thus blocked our client's return. The case was reported to the appropriate department of the Ministry of Finance and after obtaining a legal opinion from the VAT Department, we received information about the adaptation and effective update of the system and confirmation from the tax office itself that the return could be submitted again.
This time successfully. The undoubted success, however, was accompanied by a bit of stress - what if the automation of settlements stood in the way of the correct application of the law and our business reality? Were it not for our intervention, the consequences of rejecting the return by the system would be severe and very costly for the taxpayer requiring retroactive registration in all Member States of consumption and payment of VAT along with late payment statutory interest.
