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Businesses which enter into complex commercial transactions should take into account the Polish and EU rules and regulations concerning so-called chain transactions. As the rules governing chain transactions frequently raise doubts, in working out the tax treatment as well as associated risks and obligations, it is worth consulting specialists with knowledge and experience in tax advisory for businesses.
What are chain transactions?
Chain transactions are such transactions where the same goods are supplied by several entities, and the goods are delivered directly from the first supplier to the last customer in the chain.
What distinguishes chain transactions from other types of transactions is the fact that the goods are physically delivered only once (from the first supplier to the last customer), while from the legal perspective, chain transactions involve several supplies, as each party to the transaction handles the goods as their owner (at a specific moment).
How can the place of supply of goods be determined for chain transactions?
In economic practice, chain transactions between businesses from different EU member states are very common. However, due to complex regulations, the tax treatment of such transactions raises a lot of uncertainties.
In order to adequately determine the tax treatment of individual transactions, business owners must each time analyse the detailed terms and conditions for the supply.
In the case of chain transactions, the dispatch or transport is assigned to only one supply.
It is the so-called movable supply which, provided that other conditions are met, can benefit from the zero rate of VAT. Supplies preceding the movable supply are taxable with the domestic rate of the place where the dispatch or transport of the goods began, while supplies taking place after the movable supply are taxable with the domestic rate of the place where the dispatch or transport of the goods ended.
Therefore, to apply the proper tax method of chain transactions, it is crucial to determine which supply is a movable supply in a given transaction. And to identify the movable supply, it is necessary to establish which party to the transaction is actually responsible for the cross-border transport of the goods (i.e. which party to the chain transaction organises the transport).
Is a foreign party to a chain transaction obliged to register for VAT in Poland?
In order to establish whether or not a party to a chain transaction is obliged to register for VAT in Poland, one needs to analyse the terms and conditions of the particular transaction.
Businesses conducting chain transactions should each time analyse specific supply arrangements. This action should be performed adequately beforehand: failure to register within the time limit required by law may deprive the taxable person from the right to apply the preferential zero rate of VAT.
Consult RSM Poland's experts
With a fluent command of Polish, English, and German languages as well as having practical experience in supporting businesses which carry out cross-border transactions and expertise in chain transaction advisory, RSM Poland's tax advisors can offer comprehensive support to Polish and international businesses consisting in a detailed analysis of tax matters and risks involved.
Our service of chain transaction support includes:
- Analysis of transactions – as the first step, while examining your business activities, we identify potential risk areas associated with the transactions.
- Implementation of appropriate measures – next, our tax advisors provide solutions aiming to ensure that the tax treatment is in compliance with Polish and international regulations and that the right to apply the zero rate of VAT is retained.
- Optimisation of tax procedures – finally, we share our experience in improving and structuring tax-related procedures, supporting businesses in adopting solutions and internal processes for seamless handling of chain transactions.
Furthermore, if the nature of your business activity entails additional obligations, we also offer comprehensive support in their fulfilment as part of the VAT compliance service. Feel free to contact us!