Important decision from the Supreme Administrative Court [NSA]: Tax Authorities are now required to assess the correctness of the statistical classification in tax rulings.

The Supreme Administrative Court has confirmed that the Director of the National Fiscal Information Bureau will now be required to assess the correctness of the statistical classification when issuing a tax ruling. This change in the tax authorities’ approach should translate into better protection for taxpayers.

For many years, taxpayers have been requesting that the tax authorities confirm the classification of goods and services when applying for individual rulings. The correctness of this classification is, in many cases, of utmost importance since it is linked to the application of the relevant tax rate.

In 2017, the appropriate classification became very important for the construction industry due to the fact that the majority of the services rendered by subcontractors became subject to the reverse charge mechanism (which meant that VAT was accounted for by the purchaser, and not by the seller). The services subject to this type of settlement (together with their PKWiU classification) were listed in Attachment 14 to the VAT Act.

Even though the appropriate classification of goods and services is important for the purpose of VAT, the tax authorities consistently refused to tackle this issue in their tax rulings. There were numerous instances where issuing of rulings was actually refused. The tax authorities maintained that an adequate classification was the taxpayer's obligation and, consequently, the appropriate code from the PKWiU should be provided as an element of the factual state of the request, and as such, should not be an element of the question asked. According to the tax authorities, their task was only to provide interpretations of tax law, therefore, the determination of the correctness of the classification of goods and services for statistical purposes was beyond the scope of their authority.

The above practices were questioned by the Supreme Administrative Court in its decision dated 29 September 2017 (file no. II FSK 179/16), the grounds of which were made public in March 2018. The judges were of the opinion that if an additional provision referring to the statistical classification was the condition for the application of a given manner of taxation, the authority issuing the tax rulings could not refuse to assess whether the taxpayer had correctly classified the relevant goods, or services. This was conditional upon the inclusion, in the relevant application, of a detailed description of the given goods or services, for example, by way of providing the composition of a given product, or the manner of its production, etc.

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