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VAT Exemption Granted: Loans as Taxable Persons No Longer Subject to Provisions - My Vat Calculator

VAT Exemption Granted: Loans as Taxable Persons No Longer Subject to Provisions

"Tax Authorities Receive Application for Individual Interpretation Regarding Goods and Services Tax Consequences of Loan Granting"

Scope of the Application for an Individual Interpretation

On July 4, 2023, an application for an individual interpretation was received concerning the tax on goods and services in relation to the tax consequences of granting a loan. The applicant, an active VAT payer with a registered office in Poland, provided a detailed description of their future event.

The applicant’s business activities include being an insurance agent and broker, as well as engaging in activities related to risk assessment and estimation of incurred losses. They also provide services as a collection agency and credit bureau, engage in finance lease, and offer other activities supporting financial services, excluding insurance and pension funds. Additionally, the applicant is involved in other financial service activities, including data processing, website management, and similar activities.

As part of their business activity, the applicant intends to provide a service to a counterparty, who is also an active VAT payer in Poland. This service involves granting loans to the counterparty’s customers on preferential terms. In return for this service, the applicant will receive remuneration from the counterparty.

The applicant has the right to refuse to grant a loan to a customer without providing a reason or to offer a loan on standard terms. In such cases, the counterparty is not entitled to any claims against the applicant, and the applicant will not receive remuneration.

The remuneration received by the applicant will depend on the amount of consumer loans granted on preferential terms. It will be calculated as the product of consumer loans granted and a percentage rate. If a customer successfully withdraws from a loan agreement, the applicant is not entitled to the remuneration for that agreement.

The applicant states that by offering consumer loans on preferential terms, they enable the counterparty to offer financing to a wider group of customers. This, in turn, allows the counterparty to expand its customer base and become more competitive in the industry. The remuneration received by the applicant ensures their liquidity, as the counterparty bears part of the cost of the consumer loan.

The question at hand is whether the preferential loan service provided by the applicant should be considered a financial service and be exempt from VAT. According to the applicant, it should be taxed on the terms provided for financial services and be subject to VAT exemption.

According to the VAT Act, VAT applies to the supply of goods and the provision of services for consideration within the country. The applicant argues that the preferential credit granting service they provide falls under the provision of services and should be exempt from VAT.

The applicant refers to case law from the Court of Justice of the European Union, which states that if a service is provided for consideration, it is subject to VAT only when there is a direct relationship between the services provided and the remuneration received. The applicant believes that such a direct relationship exists in their case.

In conclusion, the applicant argues that their preferential credit granting service should be considered a financial service and be exempt from VAT. They base their argument on the provisions of the VAT Act and the case law of the Court of Justice of the European Union.

It is now up to the relevant authorities to review the application and provide an individual interpretation on the tax consequences of granting a loan in this particular case.

Barry Caldwell

Barry Caldwell

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