Correction of costs due to unpaid invoices

From January 1, 2013, amendments to the Personal Income Tax Act and the Corporate Income Tax Act apply. They concern tax deductible costs, and more precisely, timely payment for benefits. In the PIT Act, Art. 24d, while Art. 15b. In accordance with the aforementioned regulations, the right to settle the cost is indirectly related to the timely payment for the purchase of goods or the performance of a service. However, on January 1, 2016, the rules governing the adjustment of costs changed drastically again.

Cost adjustment by the end of 2015

Pursuant to the regulations in force until the end of 2015, failure to pay an expense that has been booked as costs causes the taxpayer to exclude it from tax deductible costs, and thus to correct entries in the records.

Originally, an expense can be booked in costs even in the event of an unpaid payment. However, in such a situation, it is necessary to write off the expense, which was included in the tax deductible costs, in the event when the payment for the purchased goods or the provided service was not made within the statutory deadline. The moment of cost adjustment depends on the payment date indicated on the invoice.

The correction is not applied if the payment is made no later than 30 days from the due date (if the due date is not longer than 60 days). This also applies when the payment period exceeds 60 days, and the payment is made within 90 days from the date on which the amount resulting from the invoice, bill or other document was recognized as tax deductible costs. Payments made within the statutory deadlines will not result in tax consequences.

There are situations when the parties do not indicate the due date on the documents. In such a case, the payment should be made after receiving the request to settle it, but not later than on the date specified in the request. The date of delivery of the request for payment to the taxpayer is the beginning of the calculation of the payment deadline.

Tax deductible costs for a given period are reduced by the value of the cost that has not been paid within the prescribed period. And if the taxpayer did not incur any costs in a given period or they are less than the amount of reduction - the revenues for the given period should be increased.

Documenting cost adjustments until the end of 2015

The ordinance of the Minister of Finance on keeping the tax book of revenues and expenditures extended the catalog of accounting vouchers which are the basis for entries in the KPiR with evidence of cost reduction (increase in revenues), as well as evidence of increased costs.

Evidence that determines the reduction in tax deductible costs includes, among others:

• the date of issue of the document, as well as the month in which the reduction of tax deductible costs (increase in revenues) is made,

• in accordance with Art. 24d updof - indication of the amount resulting from the invoice / bill, and if there was no obligation to issue an invoice / bill - the amount resulting from the contract or other document, constituting the basis for reducing tax deductible costs (increasing revenues),

• indication of the amount which is a reduction in tax deductible costs (an increase in revenues),

• signature of the person who prepared the document.

On the other hand, the documents that determine the increase in costs include, among others:

• the date of issue as well as the month in which the increase in tax deductible costs is made,

• in accordance with Art. 24d updof - indication of the amount resulting from the invoice / bill, and if there was no obligation to issue an invoice / bill - the amount resulting from the contract or other document, constituting the basis for reducing tax deductible costs (increasing revenues),

• indication of the amount which is an increase in tax deductible costs,

• indication of evidence stating that the liability has been settled, by which the tax deductible costs are increased,

• signature of the person who prepared the document.

Entries in the book regarding the reduction or increase of tax deductible costs may also be made at the end of the month. The data resulting from monthly summaries is used for this.

Such a correction has numerous consequences in the form of:

• keeping a record of liabilities, allowing to determine which liabilities are already past due,

• keeping records of overdue liabilities, included in the reduction of costs (or increase in revenues) and their amounts in order to appropriately change the level of tax costs at the time of payment of these liabilities,

• constant changes in the calculation of the cost of sales, if goods and products are sold (in the case of accounting books), and

• keeping current records of paid liabilities.

Cost correction from January 1, 2016

On January 1, 2016, another revolution takes place in the field of settling unpaid expenses. The president signed an act amending the Tax Ordinance Act and some other acts. Among the new regulations there is a provision that repeals the provisions on cost adjustment (i.e. Article 24d of the PIT Act and Article 15b of the CIT Act). This means that the entrepreneur has been released from the obligation to adjust costs due to non-payment of the expenditure. In other words, from January 1, 2016, the obligation to correct unpaid costs will disappear.

Important! Entrepreneurs who made adjustments to costs by the end of 2015, under the transitional provisions, will be able to recognize them again as costs after paying them after January 1, 2016.

Example 1.

Entrepreneur N. has purchased the goods. The following dates have been specified on the invoice documenting the purchase:

• Date of issue: October 7, 2015

• Date of sale: 7/10/2015

• Payment deadline: October 17, 2015

The payment for the invoice was not made until 01/01/2016.

Pursuant to the regulations in force until the end of December 2015, the entrepreneur N. was obliged to make adjustments to the costs due to the non-payment of the invoice in November (i.e. 30 days after the payment deadline, due to the fact that the payment deadline did not exceed 60 days). Such a cost can be re-entered in the KPiR in the month of payment, i.e. in January 2016, on the basis of the cost increase document.

In the justification of the act, the legislator indicated that the basic assumptions of the act on counteracting payment backlogs, under which the cost adjustment was introduced, had not been implemented. Instead of improving the financial situation of entrepreneurs, the regulations introduced chaos, especially in settlements between small contractors, and increased administrative burdens.