VAT can be deducted back 5 years by correcting the original declaration

The taxpayer may reduce the output tax by the amount charged within the period specified in the VAT Act. If, for various reasons, the VAT deduction is not made, it is possible to submit a correction of the declaration. The condition here, however, is that the statutory deadline is not exceeded, because after it has expired, the input tax cannot be deducted.

VAT deduction - general rules

The rules for deducting tax on goods and services are regulated in Art. 86 of the VAT Act. Pursuant to the first paragraph of this provision, the taxpayer who uses the purchased goods or services in the enterprise to perform taxable activities has the right to reduce the amount of tax due by the amount of input tax. This possibility covers every active VAT payer.

The amount of input tax, on the other hand, is usually the sum of the tax amounts resulting from invoices received by the taxpayer for the purchase of goods and services or for making all or part of the payment before their purchase.

It is important to indicate the correct period in which the VAT deduction can be made by the taxpayer. This is because it is mentioned in paragraph 10, where the right to deduct arises in the settlement for the period in which the tax obligation arose in relation to the purchased goods or services. This provision shall apply mutatis mutandis to all or part of the payment made prior to the delivery or performance of the service. Importantly, the taxpayer cannot deduct VAT earlier than in the settlement for the period in which he received the invoice or customs document.

Therefore, in order to be able to deduct VAT, the following must be done:

• tax obligation with the seller and
• receipt of an invoice documenting a given expense.

If the entrepreneur fails to deduct VAT in the tax period in which the right arose, then he may use the option provided for in paragraph 11 of the above-mentioned article.

Art. 86 sec. 11
If the taxpayer has not reduced the amount of tax due within the time limits referred to in paragraph 1. 10, 10d and 10e, may reduce the amount of tax due in the tax return for one of the next two tax periods.

Deduction of VAT through the correction of the declaration

In the event that the taxpayer has not exercised the possibility of deducting VAT in the periods specified above, he or she has the right to correct the already submitted tax declaration.

It results directly from Art. 86 sec. 13 of the VAT Act, which assumes that if the taxpayer has not reduced the output tax by the amount of input tax on time, it may do so by submitting a correction of the tax return for the period in which he was entitled to such a right. Importantly, reference should be made to the period in which this right occurred for the first time (the two consecutive periods referred to in paragraph 11 should not be taken into account). The correction should be submitted to the tax office no later than within 5 years from the beginning of the year in which the right to reduce the output tax occurred.

Importantly, the correction of the settlement declaration should be submitted together with the attached written justification of the reasons for the correction. It should also be remembered that the right to deduct the tax exists only for purchases related to the performance of taxable activities (e.g. for paid delivery of goods, for paid services, exports).

Find out more! Did you know that you can deduct VAT on expenses incurred before starting a business?