Correcting down payment invoices to zero


In business practice, it happens that entrepreneurs first accept advance payments for future transactions, and only after a few months - or even years - is the actual sale. What to do if there was a change in the tax rate at the turn of these years?

Correcting down payment invoices to zero

Pursuant to the provisions of the VAT Act, invoices can be corrected, but only in strictly defined situations.

Art. 106j of the VAT Act

“1. In the event that after issuing the invoice:

1) a price reduction was granted in the form of a discount referred to in art. 29a paragraph. 7 point 1,

2) discounts and price reductions were granted, as referred to in Art. 29a paragraph. 10 point 1,

3) goods and packaging have been returned to the taxpayer,

4) the buyer has been reimbursed for all or part of the payment referred to in art. 106b paragraph. 1 point 4,

5) the price has been increased or an error in the price, rate, tax amount or any other item in the invoice has been found

- the taxpayer issues a correcting invoice. "

Additionally, remember that invoices should reflect actual transactions. Therefore, if none of the conditions listed by the act have occurred (the advance payment has not been returned, the contract has not been withdrawn), and the transaction has been completed, there are no grounds to correct the previously issued advance invoices for this transaction.

No adjustment to zero will occur despite the change in VAT rates

If the transaction for which the advance payment was accepted has been made, there will be no reason to correct the previously issued advance invoices to zero, even if the VAT rate has changed during the execution of the transaction (from the acceptance of the advance payments to the sale).

The above position is confirmed by the tax authorities in the tax interpretations issued:

Individual ruling of November 23, 2010, file ref. IPPP2-443-625 / 10-4 / KG - Director of the Tax Chamber in Warsaw

"Bearing in mind the above, it should be stated that in the present case the conditions set out in § 13 and § 14 of the quoted regulation did not exist, because the invoices were issued in a correct manner, there was a change in the VAT rate, which is an event independent of the Taxpayer, and therefore cannot affect his tax settlement, and thus cannot impose on him the obligation to issue corrective invoices. The taxation of the advances towards the price took place in accordance with the legal status in force at the time when the tax obligation arose for the advances in question for the delivery of real estate.

Taking into account the description of the future event presented in the application and the provisions of the tax law referred to in this regard, the authority states that when the Company received an advance payment before the transfer of the premises to the buyer and the transfer of ownership, the tax obligation arose - pursuant to Art. 19 paragraph 11 of the Value Added Tax Act - upon receipt of this advance payment. Therefore, the tax settlement should be made according to the rates applicable on the date of receipt of these payments (advances) by the Applicant. "

Tax obligation on advance payment and final invoice

If, prior to the release of the goods or the performance of the service, a part of the payment has been received, in particular: prepayment, advance payment, advance payment, installment, the tax obligation arises upon its receipt in this part. Thus, when the advance payment was accepted in 2009 or 2010, there was a tax obligation in relation to the amount received. Even if those advances related to a supply to be made in subsequent years in which the higher VAT rate already applied, the tax rate on those advances was still applicable on the day they were received - and that does not change.

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Of course, if the received advances did not cover 100% of the payment, and the sale took place after the rate was changed, the entrepreneur was required to issue a final invoice containing the new tax rate (i.e. the date of issue of the invoice), taking into account the reduction of the VAT due by the value of the tax already paid, with for previously received advances for the implementation of this transaction.

If the transaction for which the advances were accepted has been made as a consequence, there are no grounds to correct the previously issued advance invoices, even though a different, lower VAT rate was applicable when the advances were accepted.