Re-invoicing – what is it?
Re-invoicing of purchase costs is, in other words, the transfer of costs to the entity for which the buyer acts. Importantly – the purchasing intermediary cannot impose a markup on the transaction, as the amount on the re-invoice must be the same as the amount on the original document.
Of course, typically brokering a transaction is not the only circumstance in which re-invoicing proves to be a convenient and sometimes even necessary aid.
Another situation in which businesses regularly use re-invoicing is the rental of real estate such as offices or warehouses. The owner of the premises receives invoices from electricity or gas suppliers, and can then re-invoice them to the tenant – this is called utility re-invoicing. Thanks to this approach, the property owner does not lose control over the consumption of utilities in the premises he owns, but also does not have to harness the payments – re-invoicing makes it possible to place them themselves.
Thus, in a nutshell, reinvoicing can be understood as the resale of a good or service to a third party – the relevant buyer.
Important!
Although the concept of re-invoicing has become accepted in practice, it is vain to find such a term in Polish tax law. For the time being, reinvoicing remains a contractual mechanism, albeit one that is very often used by businesses.
What services and goods can be re-invoiced?
As I mentioned in the example above, almost any service or good can be re-invoiced: no one will be surprised by the re-invoicing of electricity or other utilities. More often, however, entrepreneurs choose to re-invoice the cost of purchasing services rather than goods.
The reason for this is simple: it is less common for an intermediary to purchase goods in a way that requires re-invoicing – if there is already an intermediary in purchases (for example, of real estate or a vehicle), the final purchase documents are usually signed by the direct purchaser or attorney, not the intermediary. His role is most often limited to advice and consultation before and during the purchasing process.
Re-invoicing and taxes
The element that raises the most doubts – especially among entrepreneurs who have not yet had the opportunity to use the re-invoicing mechanism – is the accounting of re-invoices. How does the actual re-invoicing of services affect tax liability? Should the same steps be taken in every situation?
The moment when the tax obligation arises
What poses many difficulties for entrepreneurs is the fact that the concept of reinvoicing does not exist in tax law – no law or regulation refers to it. Problems arise, for example, in determining the correct moment when tax liability arises. So how do we know how to go through the re-invoicing process?
In the absence of a clear indication in the legislation, the practice has become to apply the general rules in this case – tax liability therefore arises at the time when the service was performed (or goods delivered).
However, practice and custom are not the same as a hard rule, which can be successfully applied and referred to in ambiguous situations – as there are well-known tax interpretations that have indicated a different moment of tax liability in the context of re-invoicing – for example, the date of issuance of an invoice.
So, if in the course of business activities the need to re-invoice the purchase of goods or services arises, it is worth applying for an individual tax interpretation before proceeding further.
Re-invoicing and PIT / CIT tax
As in the case of value added tax, the general rules apply to income tax in the context of reinvoicing. Just the same, however, in extremely vague and questionable situations, it is worth applying to the National Judicial Chamber for an individual tax interpretation just to be sure.
Re-invoicing by a non-taxpayer
A situation in which the re-invoicing is done by a non-VAT taxpayer can also cause a problem in the proper interpretation. Helpful in this case turns out to be Art. 43 of the VAT Law, which states when a taxpayer can be exempt from VAT. We also know that the exemption applies to all sales, from which we can conclude that it also applies to reinvoicing – which is part of sales.
The conclusion is therefore that the re-invoicing of goods or services by a non-VAT taxpayer does not include VAT. This is important because even if a service provider or supplier of goods pays VAT and has issued an invoice with VAT included, a non-VAT entrepreneur can issue a re-invoice without VAT.
How to obtain an individual tax interpretation?
There are several possibilities: application submitted electronically, by mail to the address of the National Tax Chamber, or in person – at the KIS office.
Of course, the easiest and fastest way to get an individual tax interpretation is to apply online and log in with a Trusted Profile or a qualified certificate. You can find all the necessary information on the website of the National Tax Chamber.
To obtain an individual tax interpretation, click on the link above, download the appropriate application (ORD-IN, ORD-WS or ORD-OG) from there, fill it out, and then pay for the issuance of the tax interpretation. The cost of the operation is PLN 40 for each description of a fact or future event – you can ask several questions in one application or describe several situations; however, you have to pay for each one. The fee must be paid before submitting the application, as proof of payment must accompany the application.
Important!
You can wait up to 3 months for an individual tax interpretation. The finished interpretation will go to a box on your ePUAP profile or you will receive it by mail, if you indicate such an option in your application.
Examples of tax interpretations on reinvoicing:
The government’s Eureka Tax Interpretation Finder provides previews of interpretations that can help you properly understand your company’s situation. So before you send in a request for an interpretation, check whether a similar problem has been reported before by another entrepreneur and whether a favorable or unfavorable solution for your company is available.
Here are some examples of tax interpretations related to re-invoicing – click on one of the links to learn about the National Tax Chamber’s interpretation:
- What is the point at which revenue arises from the re-invoicing of fuel transportation services? | ITPB3/423-405/09/MT;
- At what point should the Company recognize tax income within the meaning of the Corporate Income Tax Act related to the re-invoiced services? | IBPBI/2/423-300/11/BG;
- Value-added tax on the general taxation of construction services purchased by the Applicant. | 0112-KDIL1-2.4012.163.2017.2.MR.
The above interpretations may be helpful – but if you are still unsure about how to account for re-invoicing, request an interpretation from the NIS. However, remember how long you have to wait for feedback!
