Poland blocks financial services VAT recovery on outsourced activities

Thu 4th Sep 2014

Poland will no longer allow local subsidiaries of international financial services groups to reclaim input VAT on their Polish activities if directly linked to the parent’s VAT exempt services.

A ruling by the Supreme Court this summer held that a Polish IT company which undertook outsourced administrative processes for its banking parent, from Slovakia, could not recover its VAT. This was on the basis that it related to an activity, financial services, which is exempt from Polish VAT, and in accordance with the EU VAT Directive.

Germany winning EU VAT exemption argument

The move means that the Polish authorities are now following the German view that outsourcing of financial services (banking and insurance) remains an exempt activity too, and so the companies offering these services are not able to recover their input VAT costs. This diverges from the UK view, and will give rise to concerns in that country of a potential heavy 20% VAT charge on a well-established outsourcing industry.