In plus invoice correction on the part of the seller and the buyer

As part of transactions between entrepreneurs, there are situations when it is necessary to make an adjustment to the value of the original sale. According to the adopted terminology, the correction can be made either in plus or in minus. We will consider what effects in terms of value added tax and income tax are caused by the correction of the invoice in plus, both on the part of the seller and the buyer.

What is a credit note?

Considerations should begin with explaining what a correction invoice is. The general rule is that the sale to another entrepreneur should be documented with an invoice. If the invoice issued by the taxpayer contains errors or the actual state of a specific transaction changes, it is necessary to immediately correct the invoice. This is done precisely through a credit note, the main purpose of which is to reflect the actual transaction with the counterparty. The provisions of the VAT Act provide that a corrective invoice should be issued when, after issuing the original invoice:

1. a price reduction was granted in the form of a discount,
2. discounts and price reductions were granted,
3. goods and packaging were returned to the taxpayer,
4. the buyer has been reimbursed in whole or in part,
5. the price has been increased or there has been an error in the price, rate, tax amount or any other item in the invoice.

Correcting invoice on the basis of VAT

The provisions of the VAT Act regulate the method and date of making corrections of invoices reducing the amount of tax (in minus). With regard to making adjustments resulting in an increase in the amount of tax due (in plus), the VAT Act did not explicitly provide for any regulations. However, from 2021, the legislator regulated in Art. 29a section 17, that if the tax base has increased, the correction of this base shall be made in the settlement for the tax period in which the cause of the increase in the tax base occurred.

Thus, if the correction is caused by reasons arising already at the time of issuing the original invoice, it should be settled in the JPK_V7 file for the period in which the original invoice was shown. We will deal with this in the event of a mistake in determining the price or tax rate.

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Example 1.

In February, Mr. Daniel sold the goods, which he taxed at the rate of 8%. In June, the taxpayer realized that the sold goods should be taxed at a rate of 23%, and therefore issued a correcting invoice. Mr. Daniel should increase the amount of tax due in the correction of the JPK_V7 file for February, because this month there was a reason for the correction.

However, in a situation where the correction is caused by reasons arising after the sale, the correction should be made in the JPK_V7 file for the month in which the correcting invoice was issued. This will be the case when the tax due was shown in the correct amount in the original invoice, and the reason for the correction arose later and was not foreseeable at the time of issuing the original invoice.

Example 2.

Mrs. Weronika sold the goods in March. In October, following a re-appraisal of the goods, it stated that the sales value of the goods should be increased, and therefore issued a corrective invoice. Ms Weronika should increase the amount of tax due in the JPK_V7 file for October, because this month there was a reason for the correction.

It is also worth noting that in the above-mentioned cases, the VAT adjustment by the seller is independent of the fact that the buyer receives the documentation confirming the terms of the adjustment. This means that the mere fact of issuing a correcting invoice entitles the taxpayer to make the correction.

The problem arises when it comes to the moment of settling the corrective invoice by the buyer of the goods and services. In the case of plus invoices, it will increase the amount of deductible input tax for the buyer. Contrary to the rules developed for the seller, there is no uniform position in the case of the buyer. However, one should agree with the opinion that the correction should be made in the month of receipt of the correcting invoice, regardless of the reasons for issuing it. In support of this thesis, the principle of resolving doubts in favor of the taxpayer can be cited, and in the absence of a clear prohibition on showing the corrective invoice in plus in the month of its receipt by the buyer, it is correct to adopt such a solution.

Example 3.

Mr. Robert purchased a batch of goods in July and deducted the input tax on this transaction. In November, he received a corrective invoice increasing the amount of input tax. Regardless of the reasons for issuing such an invoice, Mr. Robert has the right to correct the amount of input tax in the tax return for November (or in the next two accounting periods). Start a free 30-day trial period with no strings attached!

In plus invoice correction on the grounds of income tax

To the extent that correcting invoices relate to the settlement of income tax, numerous discrepancies appeared for a long time in which period they should be recognized in the tax book of revenues and expenses. Only the amendment to the PIT Act clearly defined these rules. Regarding the posting of invoices correcting the revenue, it was indicated that if the revenue adjustment is not caused by an accounting error or other obvious error, the adjustment is made by reducing or increasing the revenue generated in the settlement period in which the corrective invoice was issued.

Summarizing the above, it should be stated that when the correction is due to a billing error or an obvious mistake in the original invoice, the revenue must be corrected on the date of the original A / R invoice. In other cases, when a correcting invoice increases revenue, it is recognized on the date of issue on the revenue side.

Example 4.

Ms Monika sold the goods in January and for this period she recognized the revenue due in the tax revenue and expense ledger. In March, she noticed that the price was incorrectly entered on the invoice. Has issued a corrective invoice in plus. The difference should be recognized in the tax book of revenues and expenses for January.

Similar rules are provided for the buyer who, on the basis of a correcting invoice, changes the tax book on the side of costs. It was indicated that if the adjustment of the tax deductible cost, including the depreciation write-off, is not caused by an accounting error or other obvious error, the adjustment is made by reducing or increasing the tax deductible costs incurred in the settlement period in which the correcting invoice was received.

When the adjustment is due to a billing error or an obvious mistake in the original invoice, the cost must be adjusted on the original purchase invoice date. In other circumstances, the cost-increasing adjustment is recognized at the date of issue.

Example 5.

Ms Edyta purchased the goods in April and during this period she recognized the purchase as an expense in the tax revenue and expense ledger. In June, she received a correction invoice. The adjustment resulted from the re-appraisal of the goods carried out by the seller. Therefore, Edyta will increase the cost of obtaining income in June.