Poland – Polish Supreme Administrative Court decision related to the VAT treatment of supplies of medical device equipment (judgment of 30 July 2020, no I FSK 2120/19)

The recently issued judgment of the Polish Supreme Administrative Court related to the VAT treatment of supplies of medical device equipment (judgment of 30 July 2020, no I FSK 2120/19) is of importance to the industry.

Normally, in Poland supply of goods is subject to 23% standard VAT rate. However, with respect to Medical Devices in the meaning of the Medical Devices Act, Polish taxpayers may apply reduced VAT rate (8%). Only goods meeting definition of the Medical Device (i.a. registered as Medical Devices in a special register in Poland) were subject to 8% VAT rate. At the same time, equipment of the Medical Device (e.g. USG probes, Faraday cases – unless registered) were subject to standard VAT rate.

In the mentioned judgment the court confirmed that for the purposes of i.a. the Polish VAT Act, the equipment for medical devices should be treated the same way as medical devices itself within the meaning of the Polish Act on Medical Devices. As a consequence, the supply of products being an equipment for medical devices may be subject to the reduced VAT rate.

This judgment is important given the fact that so far the tax authorities have questioned the possibility of applying a reduced VAT rate to the supplies of the equipment of medical devices, claiming that only the supply of medical devices in the strict sense can be subject to reduced VAT rate. Hence, many taxpayers have so far applied a standard VAT rate to the sale of the medical device equipment.

Application of a reduced rate is critical in numerous situations, where healthcare companies participate in public tenders, where hospitals are not allowed to deduct the input VAT. The VAT is a cost and thus in public tenders hospitals ask for gross amounts for products. In relation to B2C supplies a reduced rate also would impact the producer, as the final customer would be able to buy their products much cheaper (15% gain on competitive advantage).

At the same time, I would like to point out that the judgment was issued with reference to regulations that have changed due to the entry into force of the so-called new VAT rate matrix as of July 1, 2020. Although the new regulations are technically similar to the amended ones, before applying a reduced rate for this type of supplies, I recommend applying for official confirmation of this standpoint from the tax authorities.

Should you wish to discuss both the possibility of applying such an approach and the potential selection of products that could be subject to a reduced VAT rate please contact Robert Jaszczuk, robert.jaszczuk@pwc.com.

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