What is the VAT deduction period?

The greatest privilege of entrepreneurs registered as active VAT taxpayers is the possibility of reducing the amount of tax due by the amount of input tax, and thus reducing the liability payable to the tax office. The deadline for deducting VAT on goods and services raises many doubts among taxpayers due to the multitude of regulations in this area. This article will discuss the issue of the deduction of this tax in relation to various types of invoices and their duplicates, as well as invoices documenting the import of services and intra-Community acquisition of goods. In the article we answer what is the deadline for VAT deduction!

The basic deadline for the deduction of VAT

An active VAT taxpayer has the right to reduce the amount of tax due by the amount of input tax only if the expenditure is closely related to the activities that he performs subject to tax on goods and services. In addition, the entrepreneur is obliged to have an appropriate document entitling him to deduct VAT, confirming the purchase of goods or services.

For the deduction of input tax, the applicable VAT deduction period must be taken into account. Pursuant to Art. 86 sec. 10 of the VAT Act, the entrepreneur has the right to deduct VAT in the declaration submitted for the period in which the tax obligation arose in relation to the goods and services purchased or imported by the taxpayer (on the part of the supplier, service provider).

All the above-mentioned conditions are necessary for VAT deduction, but still not sufficient. Based on Article. 86 sec. 10b point 1 of the VAT Act, the right to reduce the amount of tax due by the amount of input tax arises not earlier than in the settlement for the period in which the taxpayer received an invoice or a customs document.

On the other hand, if a person running a business registered as an active VAT payer fails to make a deduction for the period in which the tax obligation for a given transaction arose, he has the right to do so in the settlement for one of two or three consecutive tax periods. A package of benefits for taxpayers, the so-called Since 2021, Slim VAT has extended the period of the right to deduct VAT in the case of tax settlement on a monthly basis from two to three consecutive months. Taxpayers settling VAT for quarterly periods can still deduct VAT from an invoice no later than in the second quarter following the quarter of receipt of the invoice. This means that from 2021, entrepreneurs settling VAT monthly have three months to deduct this tax, and the one who has declared a quarterly settlement as many as two quarters. Let us recall, however, that not every person running a business has the right to apply quarterly settlements, this privilege does not apply to new VAT payers (for the first 12 months starting from the month in which the registration for VAT took place).

Invoices received late

As we can see, on the one hand, the entrepreneur has the right to deduct VAT only when a tax obligation has arisen, and on the other hand, he can only do so upon receipt of the invoice. Both conditions must be met simultaneously. The provisions formulated in this way raise doubts in the case of the possibility of deducting VAT on invoices received late. Let's assume that a person running a business, who settles monthly accounts, buys goods in March, but does not receive the invoice until July. Due to the lack of a document confirming the purchase, the taxpayer may not reduce the amount of tax due by the amount of input tax either in March or in the three following months. In this case, the entrepreneur has the right to deduct VAT in accordance with the date of receipt of the document, i.e. in July or in three subsequent accounting periods. Such a position was presented in the individual interpretation of the Director of the Tax Chamber in Warsaw of September 16, 2013 (IPPP3 / 443-538 / 13-2 / LK).

We count three settlement periods (for monthly settlements) and two settlement periods (for quarterly settlements) in which the entrepreneur is entitled to deduct VAT, starting from the settlement period following the month / quarter of the tax obligation or receipt of an invoice (we take into account a later event).

Lost invoices and the right to deduct VAT

If, on the other hand, we would like to deduct VAT from invoices that have been lost and were found when the deadline for VAT deduction has expired, the only way to reduce the amount of tax due by the amount of input tax is to correct the JPK_V7 file. The solution is then to submit a correction for the period in which the taxpayer had the right to reduce the amount of tax due, but no later than within 5 years from the beginning of the year in which the right to reduce the amount of tax was established (Article 86 (13) of the Act about VAT). It should be borne in mind that if the taxpayer has a surplus of input tax over due tax transferred to subsequent accounting periods, correcting the JPK_V7 file for a given month / quarter implies the need to correct all subsequent parts of JPK_V7 declaration. In the event of such a situation, it is worth analyzing whether the amount of VAT to be deducted from a given invoice is worth completing additional formalities in the form of submitting SAF-T adjustments.

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Deadline for the deduction of VAT from duplicate invoices

The deadline for deducting VAT from the duplicate invoice depends on whether the original invoice first reached the taxpayer and later was lost or damaged, or whether the entrepreneur did not receive it at all.

If the taxpayer received the original invoice and deducted VAT on this basis, the duplicate only confirms the right to deduct the tax, the date of its issue is irrelevant in this situation. In the event that the original invoice has been received by the buyer, but has been lost or damaged before the event is entered in the register of purchases, the taxpayer has the right to deduct VAT on the date of receipt of the original invoice or on two / three consecutive billing periods (depending on the frequency of VAT settlements). He must then apply to the contractor for a duplicate, if he receives it after this deadline, the only way to deduct the input tax will be to correct the relevant JPK_V7 file.

In principle, the date of issue of the duplicate will only be relevant if the original invoice has not reached the trader purchasing the service or purchasing the goods. In this case, the duplicate is equivalent to the original invoice, and therefore the taxpayer has the right to deduct VAT in the settlement for the period in which he received the duplicate invoice or in subsequent settlement periods. Importantly, an entrepreneur exercising this right should bear in mind that he is responsible for proving that he did not receive the original invoice. Therefore, if we are not able to prove it, it is worth correcting the relevant JPK_V7 file in order to deduct the tax and avoid unnecessary translations in the event of a possible inspection.

Import of services and WNT

In the case of import of services and intra-Community acquisition of goods in accordance with art. 86 sec. 10b point 3, the entrepreneur has the right to reduce the amount of tax due by the amount of input tax in the settlement for the period in which the tax obligation arose, only provided that the amount of tax due on these transactions is included in the tax return in which he is obliged to settle this tax.

If the deadline for deducting VAT has expired, the entrepreneur will be able to correct the JPK_V7 file, in which the tax obligation arose, showing both VAT is due and charged, thanks to which the transaction will be neutral on tax grounds. The package of changes Slim VAT 2 abolished the regulations that made it impossible to show VAT neutrally in a situation where the correction period of 3 months had expired.

The method of settling the import of services and intra-Community acquisition of goods on corrective invoices depends on the reason for issuing the correction. More on this subject in the article: Corrective invoice in the light of the provisions of the VAT Act