KPiR and tax proceedings - when will it be recognized as evidence?

The tax book of revenues and expenses is the basis for settling accounts with the tax office of every taxpayer who keeps simplified tax accounting. Tax authorities recognize the KPiR as evidence in tax proceedings. Find out what conditions must be met by the KPiR in order for it to be easily recognized by the office!

Tax book of revenues and expenses (KPiR)

The book of revenues and expenditures is used by taxpayers conducting business activity to determine the achieved income (or loss), i.e. the tax base and the amount of tax due for a given tax period / year. However, to make it possible, in principle, it should be:

1. non-defective and

2. reliable.

These are the two main conditions that must be met by the revenue and expense ledger according to the provisions of the Tax Code.

The KPiR is not defective if it is kept in accordance with the provisions of the Regulation of the Minister of Finance of August 26, 2003 on keeping a tax book of revenues and expenditures (Journal of Laws of 2014, item 1037) and with the explanations to the book template contained in Annex 1 to this regulation. Therefore, a defective revenue and expense ledger is one that contains formal defects.

Formal deficiencies - these are irregularities resulting from the violation of the principles of bookkeeping specified in separate regulations. For example, no page numbering, incorrect dating of events, disturbed chronology of entries in the book.

 

On the other hand, the revenue and expense ledger is reliable if it reflects the facts. The regulations also recognize as reliable a book which:

• unwritten or incorrectly entered amounts of income / cost, which do not exceed a total of 0.5% of the income / cost disclosed in the book for a given tax year or income / cost disclosed in the tax year until the date on which the head of the tax office or the tax inspection authority found these errors ;

• the lack of appropriate entries is related to an accident or random event that prevented the taxpayer from keeping the book;

• errors resulted in an increase in the amount of the tax base, with the exception of errors consisting in failure to show or understating the costs of purchasing basic materials, commercial goods and labor costs;

• the taxpayer completed the entries or corrected incorrect entries in the book before the commencement of the inspection by the head of the tax office or by the tax inspection authority;

• incorrect entries are the result of an obvious mistake, and the taxpayer has accounting evidence that meets the conditions referred to in art. 12 sec. 3 of the regulation.

The reasons for considering the KPiR as unreliable are mainly:

• entries about an event that did not actually take place (e.g. empty invoices),

• no entries about an event that actually occurred (e.g. non-disclosure of revenue),

• amounts other than actual amounts (e.g. understating income).

Consequences of unreliable and defective KPiR

The taxpayer must take into account a penalty for unreliable or defective bookkeeping of revenues and expenses. Unreliable operation of the KPiR is a fiscal offense punishable by a fine of up to 240 daily rates. The daily rate ranges from 1/30 of the minimum wage to even 400 times the lowest daily rate.

Attention! The lowest daily rate in 2016 is PLN 61.67, and the highest is PLN 24,668.

Unreliable book of revenues and expenses and tax proceedings

If the tax authority, in the course of the tax proceedings, finds that the revenue and expense ledger is unreliable, it will not allow such a tax return as evidence in tax proceedings. It may do so in whole or in part. As a consequence, it independently estimates the tax base according to the methods specified in the tax ordinance.

Estimation of the tax base by the tax authority

The Tax Code distinguishes the following methods of estimating the tax base by the tax authority:

1. internal comparative - that is, a comparison of the turnover in the same company for previous periods in which the amount of taxation is known;

2. external comparator - consisting in comparing the turnover in other enterprises operating with a similar scope and under similar conditions;

3. inventory - consisting in comparing the value of the company's assets at the beginning and at the end of the period, taking into account the turnover rate;

4. production - consisting in determining the production capacity of the enterprise,

5. cost - consists in determining the amount of turnover based on the amount of costs incurred by the enterprise, taking into account the ratio of the share of these costs in turnover;

6. the share of income in turnover - that is, determining the amount of income from the sale of certain goods and the performance of certain services, taking into account the amount of the share of this sale (services performed) in the total turnover.

In special cases, if it is not possible to apply one of the above methods, the tax authority may use a different method of estimating the tax base. If the data contained in the tax books are supplemented with evidence obtained in the course of the proceedings and allow for the determination of the tax base, the tax authority does not estimate the tax base.