(Unofficial translation)
Scope of the application for an individual interpretation
On July 13, 2023, your application of July 13, 2023 for an individual interpretation was received, which concerns the lack of the right to deduct input tax in connection with the investment consisting in thermal modernization of two municipal buildings. The content of the application is as follows:
Description of the future event
The company administers the commune’s premises on the basis of an executive contract concluded with the commune. Under this agreement, the Company is implementing an investment consisting in deep thermal modernization of two municipal buildings, in which there are only residential premises, and no business activity is conducted in these premises and they are not related to taxable sales. The investment will be implemented in the formula (…). Financial outlays for modernization are obtained from funds allocated for this purpose or from bank loans, and returned from the achieved savings). The investment in question will be partly financed from a subsidy granted by the National Fund for Environmental Protection and Water Management. The company signs a contract with both the contractor (the company (…)) and the National Fund for Environmental Protection and Water Management.
Question
Is it possible to deduct VAT in this case, or is there no possibility to deduct VAT, or is there a limited right to deduct VAT, in connection with the implementation of the Investment, which is partly financed from the funds of the National Fund for Environmental Protection and Water Management accumulated on the account of the Modernization Fund under the concluded contract for co-financing?
your position on the matter
All services purchased during the implementation of the investment are not subject to VAT deduction, because they are not related to sales taxed in full.
Job evaluation
The position you presented in your application is correct.
Justification of individual interpretation
According to Art. 86 sec. 1 of the Act of March 11, 2004 on tax on goods and services (i.e. Journal of Laws of 2022, item 931, as amended), hereinafter referred to as the “Act”:
To the extent that the goods and services are used to perform taxable activities, the taxpayer referred to in art. 15, has the right to reduce the amount of tax due by the amount of input tax, subject to art. 114, art. 119 sec. 4, art. 120 sec. 17 and 19 and Art. 124.
Pursuant to Art. 86 sec. 2 point 1 of the Act:
The amount of input tax is the sum of the tax amounts resulting from the invoices received by the taxpayer for:
- a)purchase of goods and services,
- b)making all or part of the payment before purchasing the goods or providing the service.
It follows from the above provisions that the right to reduce the amount of tax due by the amount of input tax is granted when certain conditions are met, i.e. the deduction is made by a registered, active payer of VAT and when the goods and services for which the tax was acquired accrued, are used to perform taxable activities, i.e. those which result in determining the tax due (creation of a tax liability).
The rule presented above therefore excludes the possibility of reducing the amount of tax due by the amount of input tax related to goods and services that are not used to perform taxable activities, i.e. when they are used for activities exempt from VAT and not subject to VAT.
Against the background of the presented description of the case, your doubts concern the right to deduct VAT in connection with the implementation of the Investment.
In the present case, the conditions for deducting input tax are not met. As you have indicated, you are implementing an investment consisting in deep thermal modernization of two municipal buildings, in which there are only residential premises, and in these premises no business activity is conducted and they are not related to taxable sales.
Therefore, you will not have – pursuant to art. 86 sec. 1 of the Act – the right to deduct input VAT in connection with the implemented Investment.
Additional information
Information on the scope of the decision
The interpretation applies to the future event that you have presented and the legal status that is in force on the date of the interpretation.
Instruction on the protective function of interpretation
- The protective function of individual interpretations is determined by the provisions of Art. 14k-14nb of the Act of August 29, 1997 – Tax Ordinance (Journal of Laws of 2022, item 2651, as amended). The interpretation will be able to play a protective role if: Your situation is consistent (identical) with the description of the facts and you comply with the interpretation.
- According to Art. 14na § 1 of the Tax Ordinance:
the provisions of art. 14k-14n of the Tax Ordinance Act do not apply if the facts or future event being the subject of an individual interpretation is an element of activities that are the subject of a decision issued:
1) with the application of Art. 119a;
2) in connection with the abuse of the right referred to in Art. 5 sec. 5 of the Act of 11 March 2004 on tax on goods and services;
3) using measures limiting contractual benefits.
- According to Art. 14na § 2 of the Tax Ordinance:
the provisions of art. 14k-14n shall not apply if the tax advantage found in the decisions listed in § 1 is the result of compliance with established interpretation practice, general interpretation or tax explanations.
Instruction on the right to lodge a complaint against the interpretation
You have the right to challenge this individual interpretation to the Provincial Administrative Court in (…). The rules for challenging individual interpretations are regulated by the Act of 30 August 2002, Law on Proceedings before Administrative Courts (Journal of Laws of 2023, item 259, as amended; hereinafter referred to as “PPSA”).
A complaint to the Court is lodged through the Director of the KIS (Article 54 § 1 PPSA). The complaint should be filed within thirty days from the date of delivery of the individual interpretation (Article 53 § 1 of the PPSA):
- in paper form, in two copies (original and copy) to the following address: Krajowa Informa- tion Skarbowa, ul. Warszawska 5, 43-300 Bielsko-Biała (Article 47 § 1 PPSA), or
- in the form of an electronic document, in one copy (without a copy), to the address of the Electronic Inbox of the National Treasury Information on the ePUAP platform: /KIS/SkrytkaESP (Article 47 § 3 and Article 54 § 1a PPSA).
A complaint against an individual interpretation may be based only on the allegation of violation of the provisions of the procedure, misinterpretation or incorrect assessment of the application of a provision of substantive law. The court is bound by the allegations of the complaint and the legal basis invoked (Article 57a PPSA).
Legal basis for issuing the interpretation
The legal basis for issuing this interpretation is Art. 13 § 2a and art. 14b § 1 of the Act of August 29, 1997 – Tax Ordinance (Journal of Laws of 2022, item 2651, as amended).
Source: gov.pl
