What is Intra-Community Acquisition of Goods (ICA)?

Definition of ICA – What is it?

According to the definition of Intra-Community Acquisition of Goods in Article 9, Section 1 of the Polish VAT Act, ICA refers to “…the acquisition of the right to dispose of goods as an owner, where the goods are dispatched or transported to the territory of a member state other than the member state of dispatch or transport by the supplier, the buyer of the goods, or on their behalf.”

It is worth noting that a transaction defined as ICA is viewed from the buyer’s perspective. For ICA transactions, the other party considers it an Intra-Community Supply of Goods (ICS). For more details, see our article on What is an Intra-Community Supply of Goods (ICS)?

Both ICA and ICS require specific legal conditions to be met and necessary documentation to be ensured. If you are seeking information on ICA in this context, you’ll find it further in the article.

Conditions for applying ICA

ICA occurs when the following conditions are met:

1. The buyer of the goods is:
   • A VAT taxpayer registered for EU VAT, and the goods are intended for the taxpayer’s business activities.
   • A legal entity that is not a VAT taxpayer.
2. The supplier of the goods is a VAT taxpayer.
3. The goods are dispatched from the territory of one EU member state to another.

Exclusions from ICA

Certain transactions cannot be considered ICA.

Exclusions based on goods type

Exclusions related to the types of goods acquired include:

• Goods specified in Article 80 of the VAT Act, such as goods used by diplomatic representatives or diplomatic missions.
• Items described in Article 83 of the VAT Act, including parts for vessels and aircraft, ship supplies, or aircraft supplies.

Exclusions based on buyer status

Per Article 10, Section 1, Item 2, the following buyers are excluded from ICA:

• “Flat-rate farmers for their agricultural activities.
• Taxpayers performing only non-taxable activities and not entitled to deduct input tax from output tax.
• Taxpayers whose sales are VAT-exempt under Article 113, Sections 1 and 9.
• Legal entities that are not taxpayers, provided the total value of ICA in the country does not exceed 50,000 PLN during the tax year.

Other exclusions

Other exclusions include:

• Non-taxable supplies, such as free-of-charge transactions, unless they involve the buyer’s own goods (covered under non-transactional ICA).
• Transactions with VAT-exempt entities or taxpayers using VAT exemptions, except for new means of transport.
• Goods listed under Article 120, Section 1 of the VAT Act, such as works of art, collectibles, or antiques.

Keep in mind that ICA exclusions may change with legal updates. Regularly refresh your knowledge or consult a tax advisor for the latest guidance.

Tax liability for ICA

Tax liability for ICA arises “…at the time the taxpayer issues an invoice, but no later than the 15th day of the month following the month in which the delivery was made.”

If the invoice date is later than the 15th day of the month following the delivery month, the tax liability still arises on the 15th day of the following month, not the invoice date.

Additionally, prepayment invoices do not trigger tax liability, even if they cover 100% of the transaction value.

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Tax base for ICA

The tax base for ICA is the amount the buyer must pay for the transaction, including fees such as customs duties or taxes directly related to the delivery of goods.

When calculating the tax base for ITC, you should also take into account discounts, rebates, subsidies, or the value of excise tax that has been documented.

However, the tax base for ITC does not include costs that arise after the goods have been delivered, e.g. the amount of VAT or the costs of storing goods.

Non-transactional ICA

It is also worth mentioning here that there is also the so-called non-transactional intra-Community acquisition of goods.

Non-transactional ICA – conditions

Non-transactional ICA applies when:

• Goods are dispatched to a VAT taxpayer.
• Goods are sent from one member state to another within the EU.
• The goods are owned by the VAT taxpayer, having been produced, acquired, extracted, or imported by them, and are used for their business activities.

Examples include:

• Importing goods into the EU (e.g., to Germany) and transporting them to another member state, such as Poland.
• Moving owned goods for storage or sale in another EU country.

Zero VAT rate for non-transactional ICS

A 0% VAT rate can apply to non-transactional ICS if the VAT taxpayer is registered for EU VAT in the country of delivery and possesses documentation proving the movement of their goods, such as a CMR international waybill.

Failure to meet these conditions may result in applying the VAT rate applicable in the country of delivery.

Exclusions from non-transactional ITC

It is also worth adding that there are exclusions from non-transactional ITC, described in detail in art. 12 sec. 1 and art. 13 sec. 4 of the Polish VAT Act. These include situations where, among others:

• “the movement of goods takes place as part of intra-Community distance selling of goods;
• the goods are moved on board ships, aircraft or trains during passenger transport performed in the territory of the European Union for the purpose of their delivery by that taxpayer on board these vehicles;
• the goods are to be the subject of export of goods by that taxpayer”.

Recordkeeping obligations

VAT taxpayers engaged in non-transactional ICA must maintain records of these transactions for five years from the end of the tax year when the tax liability arose. Records must include:

• Type of sale and tax base, the tax due, and its adjustments.
• Details of deductible VAT, including adjustments.
• Contractor details.
• Proof of sales and purchases.

Moreover, according to Article 109, paragraph 9 of the Polish VAT Act, “…taxpayers are obliged to keep records of goods received, containing in particular the date of their receipt, data allowing for the identification of goods and the date of issue of goods after the service was provided by the taxpayer”.

It is worth adding that the lack of the required records may result in penalties or fines, so this obligation should not be neglected.

Summary of ICA

Intra-Community Acquisition of Goods (ICA) involves a VAT-registered buyer acquiring goods from another EU country for business purposes. ICA conditions include EU VAT registration and meeting transaction-related criteria.

However, it should be remembered that there are specific exclusions from IAC specified in the law, which concern, among others, specific goods, such as diplomatic assets and situations related to taxpayers using exemptions.

Moreover, the movement of own goods can also occur as a so-called non-transaction IAC, which allows entrepreneurs, if certain conditions are met, to apply a 0% VAT rate.

If you are an entrepreneur who needs support or tax advice on IAC, VAT or e-commerce accounting, we will be happy to provide it! Schedule a consultation, indicate what constitutes a challenge, and we will take care of the rest!