As of January 1, 2021, Great Britain ceased to be treated by the countries of the European Union as one of the states of the community. The effect of this state of affairs are tax changes, and thus also the rules of invoicing. How do Polish companies invoice British contractors today? We advise you.
The decision to withdraw Great Britain from the European Union had a number of consequences, including legal and tax consequences. One of them is the new invoicing rules effective from January 1, 2021.
New invoicing rules for British contractors
Despite formally leaving the ranks of the EU, until the end of 2020 Great Britain was treated as one of the member states. From January 1, 2021, especially in the tax context, it has the status of a third country. In practice, this means that Polish companies carrying out transactions with contractors from Great Britain are obliged to invoice them in the same way as invoices from China or the United States.
What has changed?
The countries of the European Union carry out transactions with each other on the basis of intra-Community acquisition and intra-Community supply of goods and services. Until December 31, such rules were also in force in transactions with the islanders. From January 1, 2021, both terms have been replaced by import and export, respectively. How to invoice British contractors under the new rules?
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Invoicing British contractors after Brexit – how to do it correctly
In the following paragraphs we will discuss the rules for invoicing British contractors:
- if the Polish company provides services to the UK entity;
- if the Polish company sells goods to the UK contractor.
If a Polish company provides services to a UK entity
If you provide services to a British company, the tax obligation is on the purchaser of the service. In such a situation, he is obliged to settle the tax on this service due to its import. For a Polish company, it will be an activity not subject to VAT. The company should document the service with a simplified invoice without the amount of VAT due.
If the service is not taxable in Poland, your obligation will be to document it with a simplified invoice, i.e. without showing the amount of tax due. Remember to write “reverse charge” on your invoice. On this basis, the customer will be obliged to settle the tax. However, your company will not be deprived of the right to deduct VAT on expenses incurred in the country related to the provision of this service. This right applies if the performance of these services in the country gave rise to such a deduction (i.e. when they are subject to VAT in the country).
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In service exports, a “not podl” rate is usually applied. Importantly, the value of the service must be shown in the VAT-7 declaration (item 11), even though the service is not subject to taxation. Show the value of the service in the return only if you are entitled to a tax reduction or input tax refund in relation to the service provided that is taxable outside the country. Therefore, if your company would provide a service to a foreign contractor that is subject to VAT exemption in the country, e.g. training services, it should not show its value in the VAT declaration.
If a Polish company sells goods to a UK contractor
In the case of the export of goods, you can apply the 0% VAT rate, provided that before the deadline for submitting a tax declaration for a given settlement period (e.g. until August 25, 2020 in the case of export made in 07/2020) you received the document confirming the export of goods outside the territory of the European Union. If you do not have such a document, you must issue an invoice with the local VAT rate.