On Fridays, we usually look forward to the end of the working week and postpone some tasks until the next one, so it is probably easier to take a moment over coffee to discuss less urgent – though no less interesting – topics. To inaugurate our Friday VAT puzzles over coffee, I propose a fresh case (still warm, like a bun to go with your coffee) straight from the Supreme Administrative Court. I worked on it together with Katarzyna STYPA-SADOWSKA – unfortunately, the outcome disappointed us both.

What is the taxpayer’s business model analysed by the NSA in terms of VAT, and where does the tax problem lie?

A foreign company (in this case, German) is developing in Poland part of its business focused on trading in used goods. This is a classic example of the so-called circular economy – customers can buy used items whose quality (and often specific brand) and utility are verified and confirmed by the supplier. Goods are purchased mainly from private individuals, although purchases from other businesses specialising in used goods also occur.

Circular economy is currently a strong trend – buying high-quality used items has simply become fashionable. You can get something branded (e.g. a ladies’ handbag from a famous fashion house) much cheaper and at the same time be eco-friendly – the same item will be used by more than one person.

The role of VAT in trading used goods

What do taxes have to do with the above business model? The supply of used goods may be taxed in a specific way under the Value Added Tax system. VAT generally applies to the supply of new goods – after all, it is a tax on consumption. Therefore, when trading in used goods as part of business activity, we may tax only the margin earned on such trade. This way, the expense incurred to purchase such goods – insofar as it covers the value of the goods – is not taxed again. VAT is charged only on the margin of the entrepreneur who supplies the used goods.

Unfortunately, it turns out that the VAT margin scheme works only within Poland. If a used item is purchased from a private individual in another EU Member State and transported to Poland, its entire value must be taxed again under VAT upon resale – and the same applies to the margin.

At least this is the view of the National Revenue Administration and the Supreme Administrative Court: as regards the VAT margin scheme, we are not in the EU.

What (non-)solution do the NRA and NSA propose, and what does it mean?

In the case concluded by the NSA judgment of 9 October 2025 (ref. I FSK 1343/22), the issue was that a German company purchased used goods in Germany (from private individuals) and then moved them to Poland for preparation for resale. When buying from a private individual, it does not pay VAT (nor does it deduct any). However, when moving its own previously purchased goods from Germany to Poland, it must – under the applicable regulations – report a so-called non-transactional intra-Community supply of goods (from Germany) and a non-transactional intra-Community acquisition of goods (in Poland).

This is not a transaction – since no one is selling or buying anything. You cannot sell to yourself, nor can you buy from yourself. Such non-transactional ICS and ICA are reported solely to track the movement of goods within the EU and correctly tax consumption expenditure in the country of actual consumption.

Meanwhile, the NSA claims that such technical ICS and ICA is a bizarre tax contortion: the entity sells goods to itself in Germany to buy them in Poland (again from itself). Thus, according to the NSA, the German company first acquires used goods from a private individual (e.g. in Germany), then delivers them intra-Community to itself, in order to acquire them (also intra-Community) from itself. It charges and deducts VAT (because that is – incidentally – how technical reporting of internal goods movement between EU countries works), which – according to the NSA – prevents the application of the margin scheme in Poland to the resale of such goods imported from Germany.

Moreover, the judges held that this does not result in excessive VAT taxation (contrary to Directive 2006/112/EC, as disproportionate), because in non-transactional ICS and ICA exactly the same amount of VAT is deducted as is charged. That is rather obvious.

However, one must ask: what about the next transaction? After all, if I bought a used item from a private individual, it means that VAT on the consumption of that item was already charged once (when the item was new). If I now resell it also with VAT calculated on its entire current value (increasing that value by my margin), I will again impose VAT on the (further, not repeated) consumption of the same item.

How does this look in numbers? Let us use an example:

Someone bought a handbag in Germany for EUR 100 + VAT (EUR 19). I bought this handbag some time later (without VAT) and now I will sell it for PLN 230 (EUR 50 + EUR 5 margin). According to the NSA, I must charge VAT on the entire PLN 230 (23% on EUR 55 = approx. EUR 13). As a result, both the German and Polish tax authorities will collect about EUR 32 VAT on the expenditure for the purchase of the same handbag. If we subtract VAT on my margin, it comes to over EUR 30 VAT. 

It seems that no EU or Member State regulations provide for a 30% (or higher) rate. Nor do they provide for multiple taxation of expenditure on the consumption (use) of the same item. Finally, they do not provide that the margin taxation scheme should operate only within one Member State – this would, after all, contradict the common system of value added tax and clearly discriminate against entrepreneurs operating in more than one Member State. The NSA failed to notice all this – which is a pity, because all the arguments were on the table. In the judgment of the Voivodship Administrative Court in Gliwice that it overturned... It cannot therefore hide behind the limits of the question in the interpretation request procedure.

The fight for the interpretation of VAT provisions continues

Of course, as tax advisers, we do not give up. This case concerned an interpretation and is therefore closed in that sense. Circular economy is developing so dynamically that many entrepreneurs will certainly face a similar dilemma. I hope that the NSA simply had an off day and that other judicial panels resolving disputes with tax authorities will examine similar cases more thoroughly, recognising the economic consequences of interpreting the provisions. After all, these are crucial for the proper functioning of VAT. This will be all the easier because it suffices to follow the example of the judgment of the Voivodship Administrative Court in Gliwice (I SA/Gl 1579/21) that has just been overturned.