Consignment stock

Legal base

Pursuant to Art. 2 point 27c of the Value Added Tax Act, “a consignment stock is a separated, in the territory of a given country, a storage of goods, owned by an EU-VAT taxpayer, where the goods belong to the taxpayer of the value added tax and are relocated by the taxpayer or on his/her behalf from the territory of a member country other than the territory of the country to the place from which the taxpayer – registered as the EU-VAT taxpayer and storing the goods – collects them. Transferring title to the disposition of goods to the owner takes place just at the moment of their collection”.

What is a consignment stock?

A consignment stock is a stock that belongs to a Polish entrepreneur, located on the territory of the country. Goods stored in there are imported from abroad and are still owned by a foreign supplier (so the foreign supplier is responsible for all costs related to the stock). On the other hand, the ownership passes to the recipient when they collect the goods from the stock. From the technical point of view, the consignment/call-off-stock is not different from an ordinary stock, the only noticeable difference is in the tax law.

The consignment stock is mainly used for production and service activities that benefit from international trade (excluding trading activities). Manufacturers are interested in respecting deadlines and in the availability of goods in order not to delay production and, at the same time, not to bear the costs associated with storing the huge amount of feedstock for a long period. Materials, semi-finished products, plastics, etc. stored in consignment stocks are constantly being refilled (delivered) by a foreign supplier that enables an uninterrupted purchase of goods, without planning the demand for them.

According to the fiscal definition, the consignment stock must be characterised by:

  • individualization – the possibility of using a given stock by a single foreign supplier and one recipient in the country
  • located on the territory of Poland
  • separation – a separate building or part of a warehouse space allocated exclusively for the consignment stock

the moment of transfer of ownership from the supplier to the buyer takes place at the moment the goods are taken from the stock

Running a consignment stock

In order to take advantage of simplifying cooperation between a Polish manufacturer and an EU supplier in Poland within the meaning of tax law, specific conditions must be fulfilled, e.g.:

  1. the supplier must be a VAT payer registered in another EU country, but they cannot be simultaneously a VAT payer in Poland – active as well as exempted,
  2. materials stored in the consignment stock must be used for further production or service processes,
  3. prior to the commencement of the consignment stock, a written notification about the intention to operate a stock must be submitted to the head of the tax office,
  4. it is necessary to keep detailed records of goods entered into the stock.

Before starting to run a consignment stock, a taxpayer is obliged to report to the head of an appropriate tax office with a written statement in order to obtain an official consent. There is no specific template of that document, but it should contain necessary data: the name and the seat of company, the tax number (Polish NIP) and the full address of stock. After the consent is received, the taxpayer undertakes to keep a detailed records of goods delivered to that stock. The consent must include the date of placing the goods into the stock, the date of taking the goods from the stock, data which allows for identification of goods and data on the return of goods.

It is important that goods stored in the consignment stock have to be collected within 24 months from the date of their placement, because after that time it is considered that the collection took place the day after that period.

When the goods are taken from the consignment stock by the buyer – however, no later than on the day the invoice is issued by the supplier – the ownership passes to the recipient and a tax obligation arises. It may happen that a foreign supplier issues an invoice before the actual day of collection the goods from the stock, then the tax obligation will arise not later than on the day when the invoice has been issued. Therefore, it is important for Polish entrepreneurs to pay attention to foreign contractors to keep the main assumption of the consignment stock and for the tax obligation so that it arises when the goods are taken from the stock.

If the discussed situation appears without the involvement of the consignment stock within the meaning of tax law, a foreign supplier would be charged with the goods and services tax for moving own goods to a stock in Poland from another EU Member State (then WDT* at home country and at the same time WNT** in Poland), and then double taxed also in the EU country on a “delivery” for a Polish taxpayer, applying the Polish VAT tax rate. However, then VAT registration would be necessary. Running consignment stocks allows foreign contractors to avoid registration in Poland (its activity is invisible for VAT tax settlements) and enables taxation at the supplier on the only one event under WDT and at the recipient under WNT at the moment of taking the goods from the stock.

*WDT – Polish: wewnątrzwspólnotowa dostawa towarów (ang. intra-community supply of goods)

**WNT –  Polish: wewnątrzwspólnotowe nabycie towarów (ang. intra-community purchase of goods)

Benefits of the consignment stock

The consignment stock is a great facilitation of cooperation between an EU supplier and a domestic recipient. A manufacturer using it has an assured, regular and timely replenishment of necessary materials, which gives the possibility of an effortless management of production processes and avoids overly large inventory. This solution is also beneficial for suppliers, because it provides the opportunity to benefit from tax simplifications. First of all, there is no need to register for VAT purposes in Poland, to issue invoices, submit declarations or to contact with the Polish tax office. Unfortunately, creating the consignment stock is not possible while conducting commercial activities.

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