Date of signing the protocol may determine tax obligations

In the case analysed by the court, the services provided by the taxpayer in the IT area, consisting of implementing and updating IT systems, were received in whole or in part. Remuneration was due for each stage of the work. Completion of each stage was confirmed by signing an acceptance protocol; the date of signing the protocol was treated by the Company as the date of service provision. In turn, remuneration was payable on the basis of an invoice based on the protocol. According to the taxpayer, the moment when the tax obligation arose was the signing of the protocol. This approach was disagreed with by the tax authority, which believed that the moment when the tax obligation arises is determined by the performance of the service, i.e. the actual completion of all activities, which the service provider was obliged to perform, and notification of this fact to the customer. The case was heard by the WSA in Warsaw.

– In the case under review, it is important that the taxpayer referred to the CJEU judgment in the Budimex case when arguing its position in the case. The tax authority, on the other hand, held that the conclusions of the CJEU judgment in the Budimex case should not be analogously applicable, as this judgment concerns the economic and commercial reality of the construction sector. The Warsaw WSA disagreed. According to the court, the cited judgment of the Court is applicable in the case under consideration – and may also be applicable in other cases – the CJEU judgment is, in the court’s opinion, universal in nature, i.e. it is not narrowed only to the construction sector – explains Anna Konieczna-Nowak, senior consultant at Thedy & Partners.

Let us also recall that in the Budimex case, the Court pointed to three premises, the fulfilment of which allows the assumption that the signing of the acceptance protocol can be linked to the moment when the service is performed and, consequently, to the moment when the tax obligation arises. According to one of these premises, the formality of acceptance must constitute a material completion of the service and finally determine the amount of remuneration. According to the WSA in Warsaw, this premise is fulfilled in the case in question. As pointed out by the WSA, since the Company may issue a VAT invoice to the client only after the latter accepts the work and since both parties to the agreement unanimously treat this acceptance as an integral part of the performance of the service (they agreed on it between themselves), then (in this sense) it is not possible to determine the remuneration before the acceptance (before signing the acceptance protocol).

– This means that the remuneration is determined as of the signing of the protocol, and thus, as the other two prerequisites are also met, the moment when the tax obligation arises is connected with this activity – adds Anna Konieczna-Nowak.