The sale of services related to the provision of computer software may take place through the granting of licences, most often for an indefinite period, as well as through providing customers with access to specific software without selling licences, i.e. in the form of SaaS (Software as a Service). This is the so-called cloud software delivery model, in which the service provider hosts applications made available to customers through a web browser. Customers can pay for access to the application by paying for the service on a recurring basis (e.g. in the form of a subscription) or on a one-off basis “in advance”. The provision of software in the form of SaaS very often involves the provision of so-called support services. Different ways of providing software may raise questions for the service provider about when the VAT and CIT tax liability arises.
VAT and CIT tax liability when granting a licence
First of all, it is worth noting that the established line of interpretation of tax authorities indicates that granting a licence for an indefinite period is not considered a continuous service. According to the current line of interpretation, the VAT and CIT tax liability in this case should be recognised according to general principles. This means that in VAT, it is determined in accordance with Article 19a(1) of the VAT Act on the date of performance of the service, which is usually considered to be the date on which the licence is made available to the customer, e.g. in the form of an activation link. If the provision of the licence is conditional on prior partial or full payment, the date on which the VAT liability arises will be the date on which such payment is made (Article 19a(8) of the VAT Act). Similarly, in CIT, the moment when the tax liability arises will be the date on which the revenue arises, and the revenue will arise in accordance with Article 12(3a) of the CIT Act on the date of performance of the service (provision of the licence), unless an invoice has been issued earlier or the customer has not made the payment, because in this case the date of revenue generation would be the date of issue of the invoice or payment for the licence, depending on which action was earlier.
In the case of a fixed-term licence service for which the parties have agreed on payments made in settlement periods, such a service is considered to be provided on a continuous basis, therefore CIT revenue should be recognised on the last day of each settlement period (Article 12(3c) of the CIT Act). In this case, the fact that an invoice was issued or payment was made earlier is irrelevant. Also, at the end of each settlement period, a VAT liability will arise, with the proviso that in the case of a service provided continuously for a period longer than one year, for which the settlement deadlines have not expired in a given year, the service shall be deemed to have been performed at the end of each tax year, until the end of the provision of that service (Article 19a(3) of the VAT Act).
VAT and CIT liability when providing software in the form of SaaS
Software made available to customers in the form of SaaS, assuming that the customer pays periodic subscription fees, is treated as a continuous service, therefore, CIT revenue will be recognised on the last day of each settlement period, regardless of whether an invoice has been issued or payment has been made earlier. Similarly, the VAT tax obligation arises on the last day of each settlement period.
If payment for a SaaS service is made in a single instalment “in advance”, the taxable revenue will arise in accordance with Article 12(3a) of the CIT Act, i.e. at the time of performance of the service, no later than on the date of issue of the invoice or payment of the amount due, while the VAT liability will arise at the time the service is made available to the customer. In the interpretation of 25 June 2025, No. 0114-KDIP1-1.4012.193.2025.2.EW, the Director of the National Tax Information Service confirmed that if the full amount of remuneration for the SaaS service is paid by the customer “in advance”, i.e. before the expiry of the contract period, the tax obligation arises on the date the software is made available, not on the date of payment.
Summary
Therefore, in order to correctly determine the tax moment in VAT and CIT, the provisions of the agreement for the granting of a licence or provision of a SaaS service are of key importance, as they determine whether the service is provided for a fixed period or indefinitely and how the parties settle their accounts. It is therefore necessary to analyse the contractual provisions each time, as they determine the correct recognition of tax obligations.
Anna Siwiec
Consultant
