What happens when MS does not adopt EU law
It is not unusual to observe the discrepancies between either EU law and local provisions or between the local tax practice and „the spirit of EU legislative heritage”. At times EU member states’ governments make one step further and their approach against EU principles is clear and does not require ECJ’s judgements. Such situation appears right now in Poland as Polish Ministry of Finance has not yet adopted the „VAT quick fix package” despite the obligation with that respect.
Following the Council Directive (EU) 2018/1910 of 4 December 2018 amending Directive 2006/112/EC as regards the harmonisation and simplification of certain rules in the value added tax system for the taxation of trade between Member States, Poland (as any other EU member state) should have adopted and published, by 31 December 2019, the laws, regulations and administrative provisions necessary to comply with this Directive as well as should have communicated to the Commission the text of those provisions. Instead, Polish Ministry of Finance published… a statement that the implementation of those rules will be postponed („despite the intensive legislative works”).
The described circumstance creates a question mark while thinking about relation between EU law (practically in force from 1st of January 2020) and an evident loophole in Polish tax system. Ministry of Finance is therefore giving the advices with that respect to Polish local taxpayers. The solution is simple: taxpayers can choose either current local VAT provisions or the EU law, even if not yet duly implemented. The principle standing behing such an opportunity is derived directly from the ECJ’s practice, i.e. from the „academic” settlement of 19 January 1982 C-8/81 Ursula Becker.
Technically there is no issue.
In practice however there might be some or even few of them. When we refer to ECJ’s settlements, if a Member State has not transposed the Directive into national law, the individuals may rely on the provisions of the Directive directly before national courts. That is however a different concept than just fulfilling particular tax duties on day by thay basis, in particular in „interim” period until a member state implements a new rules. What is more, the direct application of EU Directive requires an unconditional wording of the provisoions and their sufficiently precise path of interpretation. When we take a look into quick fix Directive, the conclusions are rather opposite to those principles.
That is not the biggest question mark though. The MF’s recommendation „choose the provisions” could be missleading. As contrary to what Ministry of Finance claim, current Polish law is in variety of fields more beneficial (less severe) than the quick fix concept of EU. Obviously it would be followed in interim period especially if we take in consideration the current habituations of the taxpayers. Nevertheless, there is no guarantee that tax authorities would accept such disctinction when verifying respective tranactions in day-by-day controlling activities. In other words, there are no promisses that whatever is chosen, the derived tax consequences would not be opposite in the tax office’s minds.
Just to refresh the memory, quick fix package is meant to improve the operation of VAT arrangements in the context of cross-border B2B trade. That is actually why EU adopts respective measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. One of the main features (and dissadvantages) of the current VAT system for EU transactions is its „mirror image” assumption. Each VAT taxable EU cross-border transaction has its implication in both EY state of dispatch and arrival. The harmonization of the VAT taxation rules is not only essential to avoid i.e. a double taxation risk (fully against the holy principle of VAT neutrality) but most of all also to reflect the free trade ideas and crushing any potential commercial borders and burdens between member states.
„The statement” (of course absolutely non-binding legally) is dedicated to Polish taxpayers involved in EU transactions. The same taxpayers should wonder if similar (or any) statement is even less formally issued towards the tax authorities. And if the directives in terms of applying the quick fix Directive could lead to similar conclusions.
