Unpaid liabilities and physical inventory
People who have their own business are obliged to make a physical inventory.This is a particularly important element of running a business, because its results should be taken into account when calculating income from business activities. So how to correctly construct a physical inventory?
Physical inventory provisions
The necessity to make a physical inventory, also known as an inventory, has been included in the regulation on keeping a book of revenues and expenses:
§ 27 clause 1
Taxpayers are obliged to prepare and enter a physical inventory in the book (...) on 1 January, at the end of each tax year, on the day of commencement of operations during the tax year, as well as in the event of a change of shareholder, change in the proportion of shareholders' shares or liquidation activities.
The entrepreneur may proceed to the physical inventory during the tax year, both at the will of the tax office and on his own initiative. However, as par. 28 sec. 4 of the Regulation on the conduct of the KPiR, the intention to prepare an inventory on a date other than December 31, January 1 or on the day of commencement of business activity must be notified in writing to the competent head of the tax office. This must be done at least seven days prior to the inventory creation date.
In accordance with the above-cited par. 27 sec. 1 of the Regulation, the physical inventory may cover commercial goods, basic and auxiliary materials (raw materials), semi-finished products, work in progress, finished products, shortages and waste. When making an inventory, you also need to remember about their correct valuation. It should be done as follows: Ingredients that can be included in a physical inventory
commercial goods and materials - valuation at the purchase or acquisition price or at market prices on the date of the inventory (only if it is lower than the purchase or acquisition price),
finished products, semi-finished products and shortages of own production - valuation based on production costs,
utility waste - valuation according to the value, which results from the estimation taking into account their suitability for further use.
Cost adjustment by the end of 2015
As Art. 24d of the Personal Income Tax Act, if the liabilities resulting from invoices (bills or other documents) on the basis of which the cost was recognized in the KPiR have not been settled, the taxpayer is obliged to reduce the costs by their value. If the invoice has a due date of less than 60 days, the costs must be adjusted within 30 days from the date of payment specified on the purchase document. However, if the invoice has a payment term longer than 60 days, the costs must be adjusted within 90 days from the date the expense is included in the costs (even if the payment date has not yet expired).
The correction should then be properly documented in the revenue and expense ledger. These rules apply to expenses that were incurred until the end of 2015.
Physical inventory and cost adjustment
The cost adjustment described above may sometimes also apply to physical inventory counts, as evidenced by par. 29 sec. 4a-4c of the regulation in the law of maintaining the KPiR. Otherwise, there will be a double reduction in costs - as a result of the cost correction in accordance with Art. 24d of the PIT Act and as a result of inventory differences.
In the event of an adjustment, the value of the physical inventory is reduced by the amount by which the entrepreneur reduced the cost of obtaining revenues (increased revenues), pursuant to art. 24d of the PIT Act. This happens if the reduction in tax deductible costs (increase in revenues) was related to the inclusion in the tax deductible costs of expenses related to commercial goods, basic and auxiliary materials, semi-finished products, work in progress, finished products, shortages and waste included in this inventory.
The reduction can be made by the part of the amount of the reduction of tax deductible costs (increase of revenues), which is attributable to trade goods, basic and auxiliary materials (raw materials), semi-finished products, production in progress, finished products, shortages and waste included in this list.
It should also be remembered that if for the valuation of commercial goods, basic and auxiliary materials, semi-finished products, work in progress, finished products, shortages and waste, included in the inventory, other valuation principles will apply (specified in paragraph 29 paragraphs 1-4 and 7), instead of the purchase price, purchase price or production cost, the reduction amount may not exceed the value of the selected valuation. It is also necessary to indicate the physical inventory items and the items in the book that are related to the reduction on the inventory sheet.
The last important information is the fact that if the taxpayer settles its liabilities from 2015, which were then derecognised from costs, in 2016, it will be able to include them in costs again. Such regulation will not in any way translate into the value of the physical inventory of 1 January 2015.
Cost correction - changes from 2016!
From January 1, 2016, the rule regarding the obligation to correct costs ceases to apply - entrepreneurs will no longer have to observe the statutory deadline, after which costs should be reduced by this amount or revenues increased, if the expenses are not paid. It is important, however, that the changes relate to the expenses incurred from January 1, 2016 and incurred in 2015, but when their correction would take place in 2016. If the taxpayer has made an adjustment to an expense by the end of 2015 and paid it in 2016, it may include it again on the date of payment.