Framework agreements do not need to be uniform transactions

An economic operator concluded a sale agreement whereby he purchased ten laptops to equip his office. The agreement provides that the devices are going to be supplied in two deliveries of five devices each, a month apart. The cost of five computers is 15,000 zlotys. Will this transaction be subject to the reverse charge VAT?

Since 1 July 2015 a reverse charge mechanism has applied to transactions worth more than 20,000 zlotys, between business operators, in:

- portable automatic data-processing machines of a weight <= 10kg, such as laptops and notebooks;

- handheld computers (e.g. notebooks) and similar – only portable computers, such as tablets, notebooks and laptops;

- telephones for mobile networks or for other wireless networks, including smartphones;

- video game consoles (such as those used with a television set or an independent screen) and other devices for games of skill or gambling with an electronic display – save for parts and accessories.

In the described case, the value of one delivery will be lower than the limit set in the regulation at 20,000 zlotys, above which it requires the application of the reverse charge mechanism (Article 17 par. 1c of the VAT Act). However, this regulation provides that this limit will also be applied to the so-called economically uniform transactions. This is because the number of deliveries is irrelevant, if all of them arise from the same legal relationship, in this case, from one agreement on the sale of laptops.

The economically uniform transaction is a transaction covering an agreement which provides for one or more deliveries of goods, even if they are performed under separate orders, or if more invoices are issued to documented individual deliveries (Article 17 par. 1d of the VAT Act). The reverse VAT charge mechanism will therefore be applied to this transaction, even if the value of one delivery does not exceed the statutory limit. The total value of the agreement concluded by the business operator is 30,000 zlotys (which exceeds the statutory limit) and it is the purchaser who will be obliged to settle VAT on this delivery.

The term: “economically uniform transactions” does not extend to transactions arising from the same legal relationship, but also those including more than one agreement, if the circumstances surrounding the transaction or the conditions under which it was performed differed from the usual circumstances or conditions in business trading in electronic devices listed in the provision. Consequently, tax authorities have a certain discretion in examining whether specific transactions constitute an economically uniform transaction. Only the practice of tax authorities and possible disputes before administrative courts are going to give an answer to the question of under which circumstances and transaction conditions the transactions are going to be regarded as economically uniform or non-uniform.

Many economic operators regard as important also the manner of treating framework agreements and co-operation agreements, which do not always permit an unambiguous determination of the sales conditions and delivery values. It should be assumed that agreements of this type should not be automatically qualified as economically uniform transactions. A statement to this effect was also made by the Ministry of Finance in the course of social consultations during the works on the amendments to regulations. The Ministry has stated that if at the beginning it is not clear how much of the electronic equipment will be purchased, then the framework agreement is not an economically uniform transaction within the meaning of the statutory provisions. Deliveries of goods performed under concurrent individual orders should be regarded as economically uniform transactions. The limit of 20,000 zlotys applies to one economically uniform transaction and not to a general framework agreement. Therefore, this limit is not added up over a period of time, unless it is clear from the beginning that, for example, within a year there will be a delivery of ten separately invoiced agreement tranches worth 10,000 zlotys each.

The position on framework agreements was also confirmed in a brochure of the Ministry of Finance (http:// www.finanse.mf.gov.pl/documents/766655/3160814/Broszurazmiany+w+zakresie+odwroconego+VAT.pdf). In it, the tax authorities explained, that if the value of planned deliveries did not arise from the content or all of the circumstances around the conclusion of the co-operation agreements and framework agreements, then each performed delivery/order will be a separate economically uniform transaction. A separate statutory limit of 20,000 zlotys will apply to each of them.

Telephone with a charger but without a telephone case

An entrepreneur, a natural person running a business, purchased six mobile telephones needed for his business – for him/herself and his/her employees. The total transaction value was more than 20,000 zlotys. The set of telephones included a charger and headphones. Does the reverse VAT charge mechanism apply to a mobile telephone sold together with these devices?

The reverse VAT charge mechanism with respect to electronic devices sold in sets has caused interpretation problems since the start of the application of the new provisions, namely, since 1 July 2015. The Minister of Finance prepared an information brochure including examples of the sets to which the reverse VAT charge mechanism should and should not apply. A mobile telephone sold as a set with a charger and headphones is presented in the brochure as an example of a set to which the reverse VAT charge mechanism applies in whole.