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Transport services for both goods and passengers are a complex business with numerous challenges. These go beyond logistics and ongoing management to include taxation, particularly VAT obligations. In this article, we present the key rules for taxing transport services, which under the VAT Act are taxed as services supplied for consideration.
Passenger transport and VAT – what VAT rate? The place of supply and VAT settlement for transporting people
For VAT on passenger transport, the key issue is the place of supply. Under the VAT Act, specifically Article 28f, this is where the transport takes place, taking distances travelled into account.
In practice, this generally means paying VAT in each country through which the transport passes using a mileage allocation, meaning a separate proportional calculation of the amount due for each section of an international route.
However, in most cases EU carriers, or at least those operating occasionally in a particular member state, need not worry about VAT because they can ultimately usually pay it solely in their own country.
A 0% VAT rate may apply to international passenger transport. However, this requires numerous conditions to be met, particularly proper documentation confirming its international nature.
In Poland, passenger transport is generally taxed at 8%, covering rail and land transport, sea, coastal and inland water transport, air transport and taxis.
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Goods transport and VAT – providing goods transport services. What VAT applies to goods transport in Poland? Is a zero rate possible? Domestic, intra-Community and international transport
Although VAT settlement for passenger transport may already be problematic, the real difficulties begin with goods transport.
Here, you must consider not only location, but also the customer’s tax status and the type of transport.
On the first issue, when providing goods transport to a VAT taxpayer, the place of supply under Article 28b of the VAT Act is generally where the customer has their business establishment. “Generally” matters because the Act specifies exceptions. For example, for a service connected with a fixed establishment different from the business establishment, the place of supply is that fixed establishment.
For a customer who is a domestic taxpayer, we generally apply 23% VAT or 0% when the carriage forms part of an international transport service. A similar approach applies to a customer who is a taxpayer outside the EU.
For services to non-taxable persons, meaning B2C transactions, the place of supply is:
- Where the transport takes place, taking distances travelled into account;
- Where the transport starts, if it begins and ends in two different member states.
A zero VAT rate is also possible here, provided all statutory requirements are met, particularly proper documentation and the international nature of the goods transport.
If this article interested you, explore our tax advisory services and read how we can help you:
Summary
Accounting for VAT on transport services is extremely complicated. The general rules above illustrate this well: numerous exceptions exist, and details not discussed more broadly are important.
Remember, however, that many factors affect where and how much transport services are taxed, particularly:
- · The subject and type of transport, particularly passenger and goods transport;
- · The customer’s tax status, B2B or B2C;
- · The place of supply of transport services;
- · The nature of the route: domestic, intra-Community and international transport are each treated differently.
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