Chain transactions are specific types of transactions involving many contractors. Yet, the goods are subject to only one shipment – from the first involved entity to the last one. What are chain transactions in Poland and what is their influence on VAT?
Table of Contents
- Chain transactions – what are they?
- Types of chain transactions
- What distinguishes movable and non-movable commercial transactions?
- Chain transactions and VAT
- The intermediary in chain transactions and the allocation of delivery place
- Chain transactions – the entity responsible for organizing transport or shipment of goods
- Chain transactions – summary
Chain transactions – what are they?
Chain transactions are a special type of transaction in which multiple entities make deliveries of the same goods. It is performed in such a way that the first one delivers the goods directly to the last one in the sequence of buyers. In such a case, it is assumed that the delivery has been made by all parties to the transaction. Even though the actual delivery was between only the first and last entity in the supply chain.
A distinctive feature of a chain transaction is that there is only one physical delivery of goods but several deliveries in the legal sense.
Types of chain transactions
Chain transactions can be domestic and international.
|Types of chain transactions|
|Domestic||All entities participating in it are located in the territory of one country. The goods are moved only within the country’s territory.|
|International||Entities participating in it are located in the territory of two or more countries. The goods are moved between two countries.|
What distinguishes movable and non-movable commercial transactions?
According to art.22 (2) of the Act on tax on goods and services (further referred to as: VAT Act) ‘If the same goods are subject to subsequent supplies and are dispatched or transported directly from the first supplier to the last buyer, the dispatch or transport shall be assigned only to one supply’.
The above situation is known as the so-called movable delivery.
According to Article 22, paragraph 3 of the VAT Act, the supply of goods that:
- precedes the dispatch or transport of goods, is deemed performed at the place in which the dispatch or transport was initiated;
- takes place after the dispatch or transport of goods, is deemed performed at the place in which the dispatch or transport was completed
is referred to as the so-called non-movable delivery.
To sum up, allocating a single shipment or transport to one supply means that it is a ‘movable’ delivery. All other deliveries are considered ‘immovable’.
|Types of chain transactions|
|Movable||One movable transaction that is assigned to the transport organizer.|
|Non-movable||The preceding transaction is taxed in the country from which the goods are departed. The following movable transaction is taxed in the country|
, where the goods arrived.
Identifying movable and immovable deliveries in chain transactions determines the recognition and application of a reduced 0% VAT rate. This concerns the export of goods or intra-community supply of goods.
Chain transactions and VAT
The most important issue in practice are the so-called EU chain transactions. The provisions of Article 22, paragraphs 2b-2c of the VAT Act regulate them.
The concept refers to transactions in which goods are shipped or transported from one Member State to another. The shipment or transport of these goods is assigned only to the delivery made to the intermediary.
The intermediary in chain transactions and the allocation of delivery place
An intermediary is defined as non-first supplier of goods dispatching or transporting them directly or through a third party. This entity is defined in Article 22, paragraph 2d of the VAT Act.
In the case of goods shipped or transported from the territory of one Member State to another, their shipment or transport is assigned only to the delivery made to the intermediary. This results from Article 22, paragraph 2b of the VAT Act.
Thus, the appropriate location of the intermediary is essential. This is because the transport or shipment of goods in chain transactions is attributed to it. The legislator has introduced a legal presumption in this regard. It consists in the movable delivery being assigned only to transaction made for the intermediary.
However, there is an exception to this rule. Where the intermediary has provided his supplier with an identification number for intra-community transactions assigned to him by the Member State from which the goods are shipped or transported, the shipment or transport is assigned only to the delivery made by this entity. It results from Article 22c of the VAT Act.
Chain transactions – the entity responsible for organizing transport or shipment of goods
The rules for attributing a movable delivery in EU chain transactions were set out above. Nonetheless, not always in a transaction there is an intermediary. The provisions also regulate rules for assigning transport or shipment in chain transactions depending on which of the entities in the chain is responsible for organizing the transport or shipment. We can distinguish two situations here:
- The first supplier organizes the shipment/transport.
- The last buyer organizes the shipment/transport.
|Transaction to which shipment/transport should be assigned (so-called ‘movable delivery’).|
|The first supplier organizes the shipment/transport.||The delivery should be assigned only to the transaction in which this entity participates (movable transaction constituting an export, which, under the appropriate conditions, is subject to a 0 % VAT rate).|
Transactions between other entities are immovable deliveries. They are taxed in the destination country of the goods. Namely, the place where the shipment or transport of goods is finalized.
|The last buyer organizes the shipment/transport.||The delivery should be assigned to the delivery made to the last buyer.|
Chain transactions – summary
Close cooperation between Member States is a constant element of the current economy. The VAT Act’s regulation of chain transactions allows Member States to avoid applying multiple, often conflicting regulations. The current regulation is a consequence of the Council Directive (EU) 2018/1910. It established a common rule for Member States. It states that, under certain conditions, the transportation of goods should be assigned to one delivery within the chain of transactions.
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