Treasury’s change of stance on VAT penalties
On 30 May this year, the Head of KAS changed the interpretation issued by the Director of KIS regarding the VAT taxation of penalties imposed on car park users for lack of a ticket.
What was the case about?
The municipality asked the KIS whether a penalty in the form of an additional charge for the absence of a parking ticket would be subject to VAT.
In the event that a parking ticket or a valid parking ticket is found to be missing, the lessor (the Municipality) charges the lessee (the vehicle user) an additional fee of PLN 200, which is in the nature of a contractual penalty payable under the concluded vehicle parking agreement. The Municipality was of the opinion that the contractual penalty imposed on the user of the car park in breach of the rules and regulations is compensation in the nature of a sanction and is not subject to VAT. The KAS in its interpretation originally considered the position of the Municipality to be correct.
Meanwhile, the Head of KAS considered this position to be incorrect.
In doing so, he pointed out that the contractual penalty received by the Municipality is closely linked to the use of the parking space and is related to the customer’s failure to comply with the obligations provided for in the regulations when using the space. Therefore, there is a direct link between the imposition of the contractual penalty (additional charge) and the use of the parking service (lease of the parking space). These two services – the lease of a parking space and the imposition of the contractual penalty – are interdependent, one is made only on the condition that the other is made, and vice versa. Therefore, the condition of the existence of a link between the payment of a certain amount of money by the user of the parking space and the receipt of a consideration is met, which is a necessary (and also sufficient) condition for considering that the payment of this amount will be subject to VAT.
– Consequently, the contractual penalty in question in the form of an additional payment for the lack of a parking ticket for entering a car park constitutes remuneration for the provision of services on the grounds of the VAT Act and is subject to VAT – points out Łukasz Woźniak, tax adviser, manager at Thedy & Partners.