Tax authorities issued an individual interpretation confirming that execution of offset arrangement in Poland is outside of VAT and should be treated as a complex supply. Our Tax Team assisted in preparation of the application for an individual interpretation.
The offset arrangement is often connected with a free of charge transfer of technology as well as goods to the offset beneficiary. Depending on whether the beneficiary receives primarily services or goods, the VAT treatment of the offset arrangement may also vary.
In many offset arrangements, despite the fact that the ownership of goods is transferred, the crucial aspect is providing the capability to use a certain technology. Therefore, from the VAT perspective, there are arguments to claim that the role of goods is ancillary to the transfer of technology. Additionally, if both: technology and goods are transferred without remuneration, from the VAT perspective such transfer may remain outside the VAT settlements (as a free of charge provision of services that is related to the business operations of the services provider).
In the case at hand, tax authorities issued individual interpretation confirming that execution of the offset arrangement by foreign offset provider including delivery of goods and provision of services should be perceived as a complex provision of service for VAT purposes and as provision of services for no consideration should be out of scope of VAT in Poland. Additionally, the tax authorities confirmed that due to the execution of the offset arrangement, Leonardo will not have a fixed establishment for VAT purposes in Poland.
This is significant for the entire defense industry as tax authorities for the first time presented an official standpoint with respect to VAT treatment of the offset arrangements.