The moment when a VAT tax obligation arises has for years remained one of the most problematic issues in the settlement of services. Although the Polish VAT Act states that the tax obligation arises upon the performance of a service, in practice it is precisely the determination of when a service has been performed that gives rise to the most disputes between taxpayers and tax authorities. The latest case law of the Supreme Administrative Court shows that, in the IT sector, the answer to this question is not always obvious, and the formal acceptance of work may have real significance for VAT purposes.
When is a service performed for VAT purposes?
Pursuant to Article 19a of the VAT Act, the tax obligation arises at the moment of the “performance of a service”.
In the case of services performed in part, a service is also deemed to have been performed when a part of the service for which payment has been specified is performed. However, the tax provisions do not specify exactly when a service may be considered performed. As a result, the practical meaning of this concept must be assessed each time in the context of the particular business model.
In the IT sector, where projects are often carried out in stages and are subject to testing, verification and formal acceptance by the client, the moment of actual completion of technical work is often not yet the moment when the service becomes complete and is settled between the parties.
The Supreme Administrative Court recently issued a favorable ruling for the IT sector
Such a situation occurred in the case of a company from the IT sector that provided implementation and update services for IT systems, performed either in stages or as a whole. In accordance with the arrangements between the parties, each stage of the work performed by this company was subject to acceptance confirmed by a protocol signed by the client after the client had verified the work performed. Only after acceptance of a given stage was the company entitled to issue an invoice, and the parties specified separate remuneration for each stage.
The company argued before the tax authority that, in such a model, the moment of signing the acceptance protocol should determine the moment when the service, or its separate part, is performed and, consequently, also the moment when the VAT tax obligation arises. The tax authority took the opposite position, holding that the service is performed earlier, i.e. at the moment of actual completion of the work and its submission for acceptance, and consequently should be invoiced and taxed already at that earlier moment. In the tax authority’s view, the later signing of the acceptance protocol had no significance for determining the moment when the tax obligation arises, as the protocol was merely confirmatory in nature.
The Supreme Administrative Court shared the position previously presented by the Provincial Administrative Court in this case and also disagreed with the approach taken by the tax authority[1]. The Court held that if formal acceptance of the work results from the contract, reflects the realities of the IT sector and is relevant to determining the remuneration due, it cannot be treated as a mere formality. In such a case, the signing of the acceptance protocol may also determine the moment of performance of the service for VAT purposes.
Why does the acceptance protocol matter?
First, the way in which the contractual relationship is structured is of decisive importance. If the parties have made the recognition of the service as performed conditional on its formal acceptance by the client, this mechanism cannot be disregarded when determining the moment when the tax obligation arises.
The courts also drew attention to industry realities. In IT services, acceptance of work stages is a market standard and is inseparably connected with the process of verification, testing and the need to make any necessary corrections.
The acceptance protocol often determines when remuneration becomes due and payable. Since, without formal acceptance, the contractor cannot effectively claim payment, it is difficult to conclude that the service was performed earlier in an economic and tax sense.
The Court also referred to the judgment of the Court of Justice of the European Union in the Budimex case, C-224/18, and did not share the restrictive approach presented by the tax authority with respect to that ruling. The Supreme Administrative Court rightly held that the conclusions of that judgment are not limited solely to the construction sector and may also apply to the IT sector. The Supreme Administrative Court found that formal acceptance of services, i.e. signing the protocol, may determine the moment of performance of those services within the meaning of the VAT Act if the acceptance results from the contract, corresponds to industry realities and confirms the actual performance of the work.
Practical implications for the IT sector
The above judgment of the Supreme Administrative Court confirms that a properly regulated contractual mechanism for accepting work may affect the moment of VAT settlement, especially in implementation, development and update projects carried out in stages. This does not mean, however, that the signing of an acceptance protocol will automatically determine the moment of performance of the service for VAT purposes.
The key point is that the acceptance protocol should not be merely a formal document, but a real element of the service performance process, linked to testing, verification, possible corrections, client acceptance and the right to remuneration. Companies from the IT sector should therefore pay particular attention to precise contractual provisions regarding acceptance procedures, work stages, acceptance rules and the moment when payments become due. Proper documentation may reduce the risk of disputes with tax authorities and allow for a safer determination of the moment when the VAT tax obligation arises.
[1] Final and binding judgment of the Supreme Administrative Court of 31 March 2026, case ref. I FSK 1353/23; judgment of the Provincial Administrative Court in Warsaw of 18 April 2023, case ref. III SA/Wa 2823/22.
Agata Netyks-Zych
Manager
