Invoices for utilities and the revenue and expense ledger

The amendment to the VAT Act at the beginning of 2014 brought about many changes regarding the settlement of VAT. This also included changes to the rules of media settlement. Despite the fact that more than a year has passed since then, some taxes still wonder if they include well in costs and deduct VAT on utility invoices.

Invoices for utilities - the moment of recognition in the KPiR

As for the accounting of the utility invoice as tax deductible costs, the rule has not changed. Next, the moment of its recognition in costs depends on the method of cost settlement chosen by the taxpayer: simplified (cash) or accrual.

With the simplified method, if you receive an invoice for utilities, the moment of recognizing it in tax deductible costs will be the date of issuing the invoice. With this method of cost settlement, the obligation to settle them arises when the cost is incurred. And this is tantamount to the timing of the invoice for utilities.

The settlement of the utility invoice is different with the accrual method. In the case of indirect costs, an invoice for utilities is also, as a rule, classified as tax deductible costs on the date of issuing the invoice. But there is a difference - if a given cost is at the turn of the year, then it should be divided proportionally into the cost of the current and next year. Then the cost of the current year should be booked on the invoice issue date. However, the cost of the next year should be included in January.

Utility invoices - VAT settlement

Pursuant to Art. 19a paragraph. 1 of the act on tax on goods and services, the tax obligation arises upon the delivery of goods or the performance of a service. However, accounting for VAT on utility invoices does not follow the general rule.

In the case of invoices for utilities, the moment of issuing the invoice will be decisive. So, according to Art. 19a paragraph. 5 point 4 of the VAT Act, the tax obligation arises upon issuing the invoice for:

• supply of electricity, heat or cooling as well as line gas,

• provision of services:

• telecommunications,
• listed in item 140-153, 174 and 175 of Annex 3 to the Act,
• rental, lease, leasing or services of a similar nature,
• protection of persons and services of security, supervision and storage of property,
• permanent legal and office services,
• distribution of electricity, heat or cooling as well as line gas,
• with the exception of services to which Art. 28B, which are the import of services.

It should also be noted that for utility invoices, the due date of the invoice is currently irrelevant. However, it is not entirely clear, as the supplier should issue an invoice no later than on the day on which the payment deadline is due. Therefore, if this is not met, the tax obligation with the seller will arise within this period and thus the possibility of deducting VAT from the recipient - provided that he has an invoice.

Because according to Art. 86 sec. 10 of the VAT Act, the entrepreneur has the right to deduct VAT in the period in which the seller's tax obligation arose. It should be borne in mind that the taxpayer cannot deduct VAT earlier than he received the invoice, but he has the right to do so also in two subsequent settlement periods. In the case of invoices for utilities, determining whether a tax obligation arises with the seller is not a problem, because, as described above, it arises at the time of issuing the invoice.

Example 1.

The seller issued an invoice for utilities in September and this month he was taxed. The buyer will be able to deduct VAT from the invoice in September if they receive the invoice in the same month. However, when the invoice for utilities is not received by the taxpayer until October, the VAT tax will be deducted by November 25 (i.e. in the declaration for October).

To sum up, the taxpayer has the option to deduct VAT from the utility invoice in the period in which the tax obligation arose with the seller, but not earlier than on the date of receipt of the invoice. The same applies to the received utility invoice correction. If the taxpayer has received a correction reducing VAT, he can do so when he receives the correction invoice.