On 14 November 2019, the tax team at SK&S composed of Piotr Andrzejak (partner) and Stanisław Gordziałkowski (senior lawyer) won for one of the major European construction companies a precedent-setting ruling of the Supreme Administrative Court concerning the moment at which a liability to pay VAT arises (I FSK 1148/17).
The case pertained to construction works the execution of which was halted in view of the dispute between the construction company and the Contracting Authority. Although the construction works had not been delivered and the delivery record had not been executed, and the claim for payment asserted by the construction company is questioned by the Contracting Authority, the tax authorities concluded that VAT in respect of the already performed construction works became chargeable.
The Supreme Administrative Court agreed with the taxpayer that if a construction service has not been formally delivered, this means that it has not been completely performed for the VAT liability to arise. The tax authority cannot automatically assess the VAT tax base on the basis of the amount of civil law claims pursued by the construction company as some of these claims may represent damages and – as such – cannot be considered to be a fee for a VATable service. This means that the tax liability, if any, may be claimed after completion of the civil law dispute, upon the actual payment of the fee, provided the payment does not exclusively represent a damage (which may, for example, depend on the decision of the common court issued in the civil law dispute).
The present ruling is in compliance with the ruling of the Court of Justice of the European Union issued in case C-224/18 on 2 May 2019 in which the Court of Justice placed special emphasis on the formal confirmation of delivery of the construction service (for example, the delivery record) being the circumstance creating the moment on which VAT becomes chargeable.
The ruling of the Supreme Administrative Court is legally valid.