As of January 1, 2017, the reverse VAT charge mechanism has been extended to most construction works. The reverse VAT charge involves shifting the obligation to account for VAT from the seller to the buyer. This is a derogation from the general principle that the person liable to pay VAT is the taxpayer supplying goods or services.
A service provided is subject to reverse charge settlement if the following conditions are jointly met:
- the service recipient is a registered, active VAT taxpayer;
- the service provider is a taxpayer not using the so-called VAT exemption (to be verified upon receipt of the invoice);
- the service provider provides the service as a subcontractor (to be verified for each service separately).
In order to avoid/minimize the tax risks associated with misidentification of the purchased service, as of January 1, 2017, service providers should be required to include the PKWiU (Classification of Products and Service) symbol of the performed service on their invoices. It is also advisable to place an appropriate notation on acceptance protocols in order to correctly determine the moment of tax liability.
For contractors, it is advisable to include a provision in an agreement with a subcontractor transferring responsibility for the correct classification and identification of the PKWiU code to the subcontractor.