Correcting WDT invoice in the light of the provisions of the VAT Act

Service-Tax

In some situations, entrepreneurs making intra-Community transactions are required to correct their settlements. For various reasons, it is necessary to issue a correction. As practice shows, very often a corrective intra-Community supply invoice and its settlement are a problem for taxpayers.

Tax base and the corrective intra-Community supply invoice

We apply the provisions of Art. 29a of the VAT Act (provisions on the reduction of the sales amount), in a situation where the following events occur after the delivery:

  1. the supplier will give the buyer a discount,

  2. the buyer returns the purchased goods,

  3. amounts unduly collected will be returned

- then the seller is obliged to reduce / correct the tax base by the amounts of documented, legally permissible and obligatory discounts (rebates, discounts, accepted complaints and discounts) and the value of the returned goods, amounts returned undue within the meaning of the provisions on prices and the amounts of subsidies, subsidies and other returned surcharges of a similar nature.

In the event of the above-mentioned events resulting in a decrease in turnover, the seller is obliged to issue a corrective intra-Community supply invoice.

Is the confirmation of receipt of the WDT correction obligatory?

Importantly, in the case of correcting intra-Community supplies, the legislator does not require the seller to have a confirmation of receipt of the correcting intra-Community supply invoice by the buyer.

The exclusion of this condition in relation to WDT results from Art. 29 sec. 4b point 1 of the VAT Act, according to which the condition for the taxpayer to have confirmation of receipt of the invoice correction by the buyer of the goods or services does not apply to the export of goods, the intra-Community supply of goods and the supply of goods for which the place of taxation is outside the territory of the country.

As there is no requirement for the taxpayer who performs the intra-Community supply of goods to confirm receipt of the corrective invoice by the purchaser of the goods, this taxpayer may include the intra-Community supply of goods and reduce the tax base already in the declaration for the month in which the corrective invoice was issued.

This position is confirmed by the tax authorities, an example of which is the individual interpretation of the Director of the Tax Chamber in Poznań of September 2, 2014, file ref. ILPP4 / 443-283 / 14-3 / ISN, where we can read:

(...) when the reduction in the price of the intra-Community supply item is a new circumstance, impossible to predict at the time of issuing the original sales invoice, the obligation to recognize the price reduction adjustment arises in the settlement for the period in which the reason for the correction arose. The provision of art. 29a paragraph. 13 of the Act (concerning the receipt of confirmation of receipt of the corrective invoice by the buyer) does not apply in this case, as the condition for the taxpayer to have confirmation of receipt of the corrective invoice by the buyer of the goods does not apply in the case of intra-Community supplies of goods.

As a consequence, the Company, in the situation presented in this way, has no / will not be obliged to settle the adjustment due to the price reduction in the month in which it showed the original tax obligation for a given intra-Community supply of goods. The company is / will be obliged to settle the above-mentioned in minus correction in the tax declaration for a given accounting period, in which there were / will occur circumstances justifying the change (reduction) of the provisional price, i.e. in the month in which the average monthly metal prices for a given price base were / will be announced (...).

Principles of converting a corrective intra-Community supply (WDT) invoice into the Polish currency

Invoices documenting WDT are most often issued in a foreign currency. This requires their conversion into the Polish currency. The calculation is also subject to the correction invoice of the intra-Community supply of goods. The rules for converting a foreign currency into Polish currency are set out in Art. 31a paragraph. 1 and 2 of the VAT Act. It follows from this provision that the conversion of the tax base expressed in a foreign currency into Polish zlotys should be based on the average exchange rate of the foreign currency announced by the National Bank of Poland:

  • on the last business day preceding the day when the tax obligation arises,

  • on the last business day preceding the date of issuing the invoice - if, in accordance with national VAT regulations, the taxpayer could issue an invoice before the tax obligation arises and issued it on time.

Instead of converting into zlotys using the exchange rate announced by the National Bank of Poland, the amounts used to determine the tax base expressed in a foreign currency may be converted into zlotys according to the last exchange rate published by the European Central Bank on the last day preceding the date on which the tax obligation arises. In that case, non-euro currencies shall be converted using their respective euro conversion rate. If the taxpayer issues an invoice before the tax obligation arises, and the amounts used to determine the tax base are expressed in a foreign currency on this invoice, the conversion into zlotys is made according to the average exchange rate of a given foreign currency announced by the National Bank of Poland on the last business day preceding the date of issue invoices.

In the case of a correction invoice for intra-Community supplies, it should be assumed that the rate used when issuing and converting such an invoice should be the rate used for issuing and converting the original invoice. This position is also confirmed by the tax authorities, an example of which is the letter of the Director of the Tax Chamber in Poznań of February 2, 2011, file ref. ILPP2 / 443-1919 / 10-2 / EN, where we can read:

(…) Pursuant to Art. 31a paragraph. 1 of the Act, if the amounts used to determine the tax base are specified in a foreign currency, conversion into zlotys is made according to the average exchange rate of a given foreign currency announced by the National Bank of Poland on the last business day preceding the date of the tax obligation.

Taking into account the above-mentioned provisions, it should be stated that in the case in question, the amount on the correcting invoice or credit note shown in a foreign currency should be converted at the same rate as the amount on the original (corrected) invoice, i.e. according to the average exchange rate of a given foreign currency announced by Narodowy Bank Polski on the last business day preceding the day when the tax obligation arises, in accordance with art. 31a paragraph. 1 of the act. (...)

Replacement of the goods with a new one and the corrective invoice for WDT

The provisions of the VAT Act do not contain regulations regarding the exchange of goods as part of complaints when making intra-Community supplies. Therefore, in practice, there are two ways of proceeding:

  • the complaint is treated as a continuation of the original sale and therefore has no tax consequences,

  • a corrective intra-Community supply invoice is issued, and then an invoice documenting the delivery of new (replaced) goods.

According to the first position, if the damaged goods are re-imported to the territory of the Republic of Poland, and the goods free from defects are sent to the contractor, no invoice should be issued documenting the export of (mentioned) goods (the exchange of goods should be documented only with internal documents, e.g. accounting notes ). In this case, you should also not make any entries in VAT-7 / VAT-7K declarations and VAT-EU information.

The position that the complaint is tax neutral is confirmed by the tax authorities. As an example, we can quote a fragment of a letter from the Head of the Tax Office in Bielsk Podlaski, No. US-I-3 / 443-1 / 05, of February 28, 2005, in which we can read:

(...) The rule is that only the supply of goods for pecuniary interest is subject to taxation with value added tax, and therefore when it is made free of charge - it is not subject to tax on goods and services. Releasing the goods as part of the complaint is not a paid delivery, therefore it is not subject to tax on goods and services.

Replacement, as a result of a complaint of a defective tractor for a tractor free from defects, in essence constitutes the implementation (continuation) of the sale made in 1997, and therefore the purchase by the Company of a new tractor for the purpose of the complaint remains in connection with the original sale activity, i.e. taxable activity ( …).

As indicated, in the second method, an invoice correcting the intra-Community supply of goods is issued to the original invoice.This method is also acceptable, which was confirmed by the Head of the Pomeranian Tax Office in Gdańsk in a letter of May 17, 2006, No. VI / 443-61 / 06 / JW., In which we can read:

(...) the condition deciding when to show the turnover for the correction of the intra-Community supply of goods is the nature of the event causing the need to correct the invoice. (...)

In the presented facts, corrective invoices are issued as a result of events occurring after the issuance of the original invoice - accepted complaints. Therefore, these circumstances were not known at the time of the original invoice.

Bearing in mind the above, it should therefore be stated that in the analyzed case it will be correct to include the corrective invoice in the month of its issuance (recognition of the complaint) (...).