CJEU rules ‘Early VAT Payment’ as inconsistent with VAT directive

The Court of Justice of the EU ruled that the provisions which require the payment of tax on intra-Community purchase of motor fuels within five days of their importation into Poland are inconsistent with the VAT directive. This undermines a key element of the fuel package in force since August 2016, which could bring the budget an additional PLN 2.4 billion (EUR 530 mln) annually.

Currently entrepreneurs importing, among others, motor fuels from another European Union country are required to pay the “Early VAT Payment” within five days of their entry into Poland.

The “Early VAT Payment” was meant to minimise criminal activities. According to the Union of Entrepreneurs and Employers (ZPP) the scale of illegal fuel trading in Poland in 2015 climbed above 20 percent of the legal market. One of the most popular models used by criminals was the importation of fuel by so-called “disappearing taxpayers”..

According to ZPP “the acceleration of the deadline for paying VAT advance on fuel purchases and the monitoring of transport, developed in cooperation with the fuel industry, resulted in a large increase in recorded sales. The tax revenues paid by the fuel industry in 2015 from VAT, excise duty and fuel surcharge were PLN 50 billion (EUR 11 bln), and in 2019 PLN 74 billion (EUR 16.3 bln). Most of this increase was due to a reduction in criminal activity.

In August, the multiple fuel industry organisations and the ZPP took the position that the CJEU should acknowledge the compliance of the “Early VAT Payment” with the EU law. A different decision “could undermine the confidence of legal business in EU law and EU institutions, and would also entail the risk of an increase in illegal fuel trading in Poland,” argued Marcin Nowacki, Vice-President of ZPP.

5 “We can only hope that the Ministry of Finance will now propose a different, yet effective solution which will be in line with EU regulations,” said Leszek Wiwała, president and general director of the Polish Oil Industry and Trade Organisation (POPiHN).