Your Christmas gift Santa's advice on VAT
Ho, ho, ho ... All good boys and girls found a little something under their Christmas trees from więty Mikołaj's visit on December 6, but did they spare a thought for the poor old fellow? Not only did he have to travel around the globe with a sleigh full of gifts, getting the right presents down the right chimneys all at the speed of light, but he also had to get his reindeer through customs and deal with various VAT issues at the same time.
With thanks to więty Mikołaj, I have set out below a selected sample of my most recent correspondence with the jolly one on this very subject.
Dear więty Mikołaj,
I refer to our recent telephone discussion. I confirm that as of December 5, it is necessary to obtain customs clearance for presents brought onto the territory of Poland. Goods delivered to recipients in Poland need to be permanently customs-cleared.
Goods brought into Poland on the way to other countries will need to be temporarily cleared as goods in transit. The sleigh and reindeer will also need temporary clearance. The mechanism required is, therefore, for the entire shipment to be cleared, with the customs duty paid (or guaranteed for the goods in transit).
To effect the clearance, we will need the following information from you:
" A complete list of all presents and the intended recipients
" A complete list of all presents to be re-exported and their country of intended destination
" Country of origin of each of the presents
" Customs classification code of every present
" Estimate of market value of each present
" Current excerpt from the Commercial Register of więty Mikołaj (North Pole) Ltd.
" Formal application for clearance, signed by an authorised official of więty Mikołaj (North Pole) Ltd., notarised and confirmed
" Power of attorney for an authorised customs agent to arrange the clearances (copies attached), also notarised and confirmed
" Up-to-date vaccination certificates for the reindeer
As więty Mikołaj (North Pole) Ltd. is not a Polish legal entity, it is technically impractical for it to obtain customs clearance for any of the goods on its own behalf. Clearance, therefore, should be made by a Polish entity. However, there is a special dispensation in the law that applies on December 5-6 to tubby gentlemen in red suits with long white beards, which permits such clearance to be obtained, so long as the clearance on the way into the country takes place after sunset on December 5, and all temporarily imported goods are exported before sunrise on December 6.
We look forward to receiving the above-mentioned documents from you in early course. I believe there will be a number of VAT issues that will need to be addressed, and so I will liaise with my VAT colleagues and get back to you in respect of this matter.
Kind regards,
Anna Szymańska
HHHHHH
Dear więty Mikołaj,
As discussed in my last letter, we have now looked at the VAT issues arising in respect of your trip on December 5-6. VAT would, unfortunately, be payable on import of all presents on that date, excluding those temporarily cleared in transit. The applicable VAT would be payable at the border, at the same time as the customs duty. The VAT on the presents intended for export could be secured by bank guarantee.
As regards the presents given away during your visit, there are a number of VAT issues that need to be pointed out.
All presents given away for business purposes would require an internal VAT invoice issued with 22% VAT rate on the value of gifts. You should account for the VAT to the Polish tax office before January 25, 2003. The basis of the VAT assessment is the market value of the presents given away.
VAT invoices (Faktura VAT) may be issued only by registered VAT payers, who have been given an identification number, with the exception of those entities taking advantage of the turnover exemption or exclusively selling goods or services, which are exempt from VAT. We understand from our discussions that the value of all the presents exceeds the equivalent of E38,500, so this exemption does not apply to your company anyway.
We would also like to stress that if any of the recipients of the goods leave you a glass of wódka or a few slices of apple pie, these would be subject to 22% VAT for the giver, if the giver is a VAT registered person. Additionally, this could be subject to Personal Income Tax and potentially social insurance (ZUS), if it were deemed to arise from your employment. Practically 40% of the wódka and apple pie ought to be retained by the giver to satisfy the withholding liability. I, therefore, suggest that you drink no more than 60% of each glass of wódka and eat no more than 60% of each piece of apple pie, leaving the remainder to be sent to the tax office.
On a cheerier note, if you happen to purchase anything on your rounds of Poland to take back to the North Pole for Mrs. więty Mikołaj, don't forget to ask for an invoice. The chances are that you could get your VAT refund before your next scheduled trip.
I trust this is helpful. Should you have any questions, please do no hesitate to contact me.
Kind regards,
Anna Szymańska
HHHHHH
Dear Mrs. Szymańska,
Thank you for your useful correspondence. I can see that we will have to meet to discuss matters in greater detail before my business trip, which is planned for the night of December 24.
In the meantime, I would like to let you know that I had received two letters by chimney mail from your two little girls, and whilst on this trip I was not in a position to satisfy all their requests. However, I do believe that they were pleased with the small gifts they found under their pillows.
Ho, ho, ho,
więty Mikołaj
President
Santa (North Pole) Ltd.
Anna Szymańska is a tax senior manager at Ernst & Young.
With thanks to więty Mikołaj, I have set out below a selected sample of my most recent correspondence with the jolly one on this very subject.
Dear więty Mikołaj,
I refer to our recent telephone discussion. I confirm that as of December 5, it is necessary to obtain customs clearance for presents brought onto the territory of Poland. Goods delivered to recipients in Poland need to be permanently customs-cleared.
Goods brought into Poland on the way to other countries will need to be temporarily cleared as goods in transit. The sleigh and reindeer will also need temporary clearance. The mechanism required is, therefore, for the entire shipment to be cleared, with the customs duty paid (or guaranteed for the goods in transit).
To effect the clearance, we will need the following information from you:
" A complete list of all presents and the intended recipients
" A complete list of all presents to be re-exported and their country of intended destination
" Country of origin of each of the presents
" Customs classification code of every present
" Estimate of market value of each present
" Current excerpt from the Commercial Register of więty Mikołaj (North Pole) Ltd.
" Formal application for clearance, signed by an authorised official of więty Mikołaj (North Pole) Ltd., notarised and confirmed
" Power of attorney for an authorised customs agent to arrange the clearances (copies attached), also notarised and confirmed
" Up-to-date vaccination certificates for the reindeer
As więty Mikołaj (North Pole) Ltd. is not a Polish legal entity, it is technically impractical for it to obtain customs clearance for any of the goods on its own behalf. Clearance, therefore, should be made by a Polish entity. However, there is a special dispensation in the law that applies on December 5-6 to tubby gentlemen in red suits with long white beards, which permits such clearance to be obtained, so long as the clearance on the way into the country takes place after sunset on December 5, and all temporarily imported goods are exported before sunrise on December 6.
We look forward to receiving the above-mentioned documents from you in early course. I believe there will be a number of VAT issues that will need to be addressed, and so I will liaise with my VAT colleagues and get back to you in respect of this matter.
Kind regards,
Anna Szymańska
HHHHHH
Dear więty Mikołaj,
As discussed in my last letter, we have now looked at the VAT issues arising in respect of your trip on December 5-6. VAT would, unfortunately, be payable on import of all presents on that date, excluding those temporarily cleared in transit. The applicable VAT would be payable at the border, at the same time as the customs duty. The VAT on the presents intended for export could be secured by bank guarantee.
As regards the presents given away during your visit, there are a number of VAT issues that need to be pointed out.
All presents given away for business purposes would require an internal VAT invoice issued with 22% VAT rate on the value of gifts. You should account for the VAT to the Polish tax office before January 25, 2003. The basis of the VAT assessment is the market value of the presents given away.
VAT invoices (Faktura VAT) may be issued only by registered VAT payers, who have been given an identification number, with the exception of those entities taking advantage of the turnover exemption or exclusively selling goods or services, which are exempt from VAT. We understand from our discussions that the value of all the presents exceeds the equivalent of E38,500, so this exemption does not apply to your company anyway.
We would also like to stress that if any of the recipients of the goods leave you a glass of wódka or a few slices of apple pie, these would be subject to 22% VAT for the giver, if the giver is a VAT registered person. Additionally, this could be subject to Personal Income Tax and potentially social insurance (ZUS), if it were deemed to arise from your employment. Practically 40% of the wódka and apple pie ought to be retained by the giver to satisfy the withholding liability. I, therefore, suggest that you drink no more than 60% of each glass of wódka and eat no more than 60% of each piece of apple pie, leaving the remainder to be sent to the tax office.
On a cheerier note, if you happen to purchase anything on your rounds of Poland to take back to the North Pole for Mrs. więty Mikołaj, don't forget to ask for an invoice. The chances are that you could get your VAT refund before your next scheduled trip.
I trust this is helpful. Should you have any questions, please do no hesitate to contact me.
Kind regards,
Anna Szymańska
HHHHHH
Dear Mrs. Szymańska,
Thank you for your useful correspondence. I can see that we will have to meet to discuss matters in greater detail before my business trip, which is planned for the night of December 24.
In the meantime, I would like to let you know that I had received two letters by chimney mail from your two little girls, and whilst on this trip I was not in a position to satisfy all their requests. However, I do believe that they were pleased with the small gifts they found under their pillows.
Ho, ho, ho,
więty Mikołaj
President
Santa (North Pole) Ltd.
Anna Szymańska is a tax senior manager at Ernst & Young.
