Taxes on goods and services as a tax charged on consumption should, in principle, charge a service at the point of consumption, which often does not coincide with the place of actual supply of services.
The place of taxation of cross-border services is often in doubt because of the difficulty of determining in which country the service is performed, especially when its implementation requires operating in many countries.
By means of law of 23 October 2009 on amending the law on tax on goods and services (journal of laws no. 195, pos. 1504) amendments were made, from 1 January, 2010, to the act of 11 March, 2004 on tax on goods and services (journal of laws no. 54, item. 535, as amended.), which goal was to implement the changes introduced by Directive 2006/112/EC of the Council Directive 2008/8/EC of 12 February, 2008 concerning the place of supply. The purpose of these changes was the modification of general principles regarding the place of supply of services in transactions between taxable persons from the place of the registered office of the provider to the one of the customer.
This means that the tax should be settled by the purchaser under so-called reserve charge mechanism (in other words, tax due self-calculation solution with the possibility of deductions). Consequently, services should not be charged with tax in the country of the provider of the service, and the purchaser will charge and deduct value added tax by themselves. Audit on correct accounting of services by the clients within the Community will be supported by the obligation to account for these transactions in the information summary.
The changes eliminated the need to apply for tax refund by the client in the provider's state.
According to the abovementioned statements, the provision, introduced in article 28b paragraph 1 of the law on tax on goods and services, determines a general rule indicating that the place of supply for services rendered to the taxpayer is the place where the taxpayer being the client has established their business premises or place of permanent residence, subject to par. 2-4 and art. 28e, art. 28f paragraph 1, art. 28g paragraph 1, art. 28i, 28j and 28n. However, if the services are performed for the taxpayer’s fixed establishment which is located in a place other than their business premises or place of permanent residence, the place of supply of these services is this particular fixed establishment. This means that the taxation of value added tax of the service provided occurs in the place of actual utilization, in other words, consumption by the client.
It should be emphasized that these rules apply to services provided to taxpayers of the tax on goods and services, who, for the purpose of such transactions, are defined in art. 28 of the act on tax on goods and services. In accordance with art. 28 b paragraph 4 of the analyzed act, in case of providing services to taxpayers, when those services are intended for personal purposes of the taxpayer or his employees, including former employees, partners, shareholders, cooperative members and their household members, members of constituting bodies of legal persons or members of the association, the provisions of art. 28c are applied in order to determine the place of supply. Consequently, the place of supply is the place where the provider’s business premises or place of permanent residence is established.
Therefore additional client verifying obligations were imposed on the providers. The decisive element in this respect is the number - EU VAT for EU country or another number of a similar nature in case of a third country. The provider is obliged to verify its reliability by means of using VIES.