Czasopismo Puls Biznesu

Many businesses are in doubt whether VAT applies to amounts they receive from their business partners as compensation for breach of contract. According to the taxman, such amounts may constitute taxable consideration for a service. According to Director of National Revenue Information (ruling ref. 0112-KDIL1-2.4012.583.2017.1.JO), where a contract party fails to take an ordered delivery and is thus charged some amount, the other party in fact supplies a taxable service for a consideration. The consideration is the amount received from the first party, on which the other party must pay VAT. However, the Wrocław Provincial Administrative Court thought otherwise (case no. I SA/Wr 265/18). The court held that the amount received from the first party in respect of his failure to take the delivery is compensatory in nature and as such represents damages which are not a VATable consideration.

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