An invoice with an error can be canceled - it's good to know
In economic practice, there are situations in which, after issuing the invoice, there will be circumstances that affect its content. Although the provisions of the VAT Act do not provide for the possibility of canceling such a sales document, the entrepreneur - under certain conditions - may have the right to withdraw an incorrect invoice. This view was formed in the opinions of tax authorities and entered the daily practice of entrepreneurs. Check when an invoice with an error can be canceled!
Invoice with error - correction or cancellation?
The provisions of the VAT Act in the version effective from January 1, 2014 provide that in the event of economic events affecting the content of the original invoice (e.g. a discount, return of goods, observation of an error), it is possible to correct it by issuing a correcting invoice or - in certain situations concerning minor mistakes in the content of the document - a corrective note.
The jurisprudence, however, accepts another option, undoubtedly very practical, but not taken into account under the VAT Act or executive regulations - to cancel such an invoice. Acting in this way is accepted by the tax authorities, but only if the four conditions developed by the jurisprudence are met:
- the invoice has not been introduced into legal circulation,
- the invoice does not reflect a real economic event (e.g. there was no documented sale),
- the issuer of the invoice has both copies - intended for the buyer and the other for the seller,
- the issuer will make an annotation on the invoice indicating that it has been canceled, including the reason.
While the issue of making the above-mentioned entry on the canceled document and the obligation for the issuer of the invoice to have both copies of the invoice should not raise any doubts, the other two conditions may cause some interpretation difficulties.
Invoice not entered into legal circulation
In accordance with the above-mentioned conditions, only an invoice that has not been introduced into legal circulation by the taxpayer may be canceled. What exactly does this phrase mean?
An invoice is introduced into legal circulation when it has been collected by the buyer. If such a situation took place, the entrepreneur has no right to cancel the issued document. Such an opinion was presented in the judgment of the Provincial Administrative Court in Warsaw of September 15, 2011 (reference number III SA / Wa 397/11).
Moreover, some tax authorities assume that an invoice cannot be entered into legal circulation also when:
- the invoice was sent to the buyer, but the buyer refused to collect the package,
- the sent invoice will be returned with the annotation "addressee unknown".
Some tax authorities claim that the invoice has not been legally traded if both copies are in the possession of the issuer. This also applies to the case when the document has been sent to the buyer and the seller has sent it back to the seller, without including it in the books. However, in such cases, caution is advised, because the vast majority of tax authorities do not agree with this interpretation, for example: "(...) the buyer might as well not return such an invoice, informing that he will not pay for the service already paid (.. .) ”(Judgment of the Provincial Administrative Court in Warsaw of April 8, 2009, reference number III SA / Wa 3463/08).
The invoice does not reflect the real thing
The only case when an invoice can be canceled is when the invoice documents an action that has not been performed. It is about events that were documented before their occurrence and, as a result, were not concluded, e.g. an invoice was issued on the basis of an order, from which the contractor finally resigned, so there was no sale and therefore no tax obligation and at the same time the issuer has not yet handed over the invoice to the contractor.
A similar situation will be mail order sale with cash on delivery, when the seller sends the issued invoice together with the goods, and the addressee does not collect the order or pays for it, and the goods are returned to the seller together with the invoice. In this case, the action specified in the invoice was not performed and the contractor did not receive the invoice, therefore it is possible to cancel it.
Another non-genuine case is when the same service or delivery of goods is invoiced twice. Also in this case, the seller may cancel one of the documents issued by him.
When is the corrective invoice necessary?
In a situation where any of the above conditions is not met, in order to correct the error, an invoice or a corrective note is prepared, depending on the error category and the party making the correction.
Therefore, invoices with incorrect data or values cannot be canceled. Similarly, an invoice that has already entered legal circulation cannot be canceled, although the event documented on it did not take place. In this case, the only option is to correct it to zero by issuing a correcting invoice.
Cancellation of electronic invoices
The case law on the cancellation of invoices mostly applies only to documents issued in paper form. However, due to the growing popularity of the electronic sister of the traditional invoice, it seems that the right to cancel should also apply to them. This view is confirmed by the already available individual rulings (eg individual rulings of December 21, 2010, issued by the Director of the Tax Chamber in Warsaw, reference number IPPP1 / 443-1055 / 10-4 / AP).