WSA: Business Succession without VAT Taxation

Today, the Provincial Administrative Court in Warsaw (non-resident department in Radom) issued a precedent judgment regarding VAT taxation termed as enterprises in decline. The court overturned the contested individual interpretation, according to which the only heir was obliged to draw up a physical inventory and to tax VAT on the goods she had acquired as part of the inheritance of her deceased mother, despite the fact that she intended to use them in her own business (subject to VAT).

The case concerned changes in VAT recently introduced by the Act on the succession management of a natural person. The new regulations were aimed at facilitating the acquisition by heirs of businesses run by natural persons. As a result of imprecisely written regulations, however, in certain situations the problem of the need to tax the decrease in VAT arose despite the desire to continue the business.

According to the Court, the interpretation of the new provisions of the VAT Act by the tax authority (Director of the National Tax Information Office) led to a breach of the principle of VAT neutrality. The court noted that in the described facts there was no “consumption” of goods because they were used for the purposes of the taxable economic activity of the heir. Therefore, there was no obligation on their side to draw up a physical inventory and value added tax on goods. The court also stated that the provisions of the VAT Act should be interpreted in accordance with the provisions of EU law, in particular the provisions of Directive 2006/112/EC of the 28th of November 2006 on the common system of value added tax, therefore it was possible to depart from the literal wording on the provisions of the Polish VAT Act.

Today’s ruling concerns a case that stirred up the media at the end of last year. The taxpayer, a natural person running a business, was the only heir of her deceased mother who also ran a business with a similar profile. After the death of her mother, the taxpayer continued her business under the so-called enterprise inheritance acquired by it. After the right to appoint a successor administrator had expired, she applied to the Director of the National Treasury Information for an individual interpretation and confirmation that there was no obligation to draw up a physical inventory and VAT tax on the goods she acquired as part of her succession and which she uses as part of her taxable inheritance business activity. However, the director of the National Tax Information Office stated that the taxpayer’s position was incorrect since, according to the literal wording of the regulations, she was obliged to draw up a physical inventory and VAT taxation not only on commercial goods, but also on fixed assets acquired in this way.

The client disagreed with the position of the Director of National Tax Information and asked SSW Pragmatic Solutions for help in preparing the complaint. The lawyers of the SSW raised the complaint, inter alia breach of the principle of VAT neutrality. The court found these allegations to be correct and annulled the individual interpretation under appeal. In the oral justification of the judgment, the court referred to the fact that the tax authority violated the principle of VAT neutrality. He also pointed out that VAT is used to tax consumption, while for entrepreneurs it should be neutral. Therefore, the acquisition of goods and their use by the entrepreneur for the purposes of taxed economic activity should not be subject to taxation under the VAT Act.

The case was managed by the SSW tax team: Łukasz Karpiesiuk, Tomasz Wickel, Krystian Trzciński and Wojciech Szaruch.


  • reference number: VIII SA / Wa 791/19
  • reference number of individual interpretation: 0114-KDIP1-3.4012.244.2019.2.RMA

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