VAT deductions in 2014

Entrepreneur, you should know that 2014 brought many key changes to the Value Added Tax Act. Fundamental modifications concern the moment when the tax obligation arises, which is of great importance for the date of deduction of input VAT. The most common situations in relation to the method of tax deduction after the amendments to the VAT Act will be presented below.

Tax obligation and the right to deduct VAT in 2014

The most important factor that caused so many changes in the rules of VAT deduction is the moment when the tax obligation arises on the part of sellers. Until the end of 2013, the rule was (to which there were exceptions) that this moment fell on the date of issuing the invoice (which had to be drawn up within 7 days from the delivery of the goods or the performance of the service). Now, in this respect, the date of delivery of the goods or performance of the service is of crucial importance. On the other hand, the right to deduct the input tax takes place when the tax obligation arises on the part of the seller, but not earlier than when the invoice is received, as stated in Art. 86 section 10.

Invoice and the right to deduct VAT in 2014

Two conditions must therefore be met before the taxpayer deducts the tax from the invoice. First, there must be a tax obligation, that is: the goods will be delivered, the service performed or the payment made. Second, the taxpayer must receive an invoice.

As a rule, the invoice should be issued no later than on the 15th day of the month following the month in which the tax obligation arose. The taxpayer has the right to deduct the tax in the settlement period in which he received the invoice or in one of the two subsequent periods - months or quarters (Article 86 (11) of the VAT Act).

The date of receipt of this invoice is therefore relevant. Imagine a situation where the seller's tax obligation arose in January and the taxpayer received the invoice only in July. In this case, the taxpayer has the right to deduct the tax from the invoice on its receipt or in one of the two subsequent accounting periods. The right to deduct VAT is the taxpayer's basic right, and the regulations should enable its implementation. Additionally, pursuant to Art. 86 sec. 13 of the VAT Act, if the taxpayer has not managed to deduct VAT within the statutory deadlines, he may reduce the amount of tax due by correcting the tax return for the period in which the right to reduce the amount of tax was established.

For taxpayers, the provisions of para. 11, talking about the deduction of VAT in two subsequent periods, because it did not refer directly to sec. 10b, which in turn makes the deduction of VAT dependent on the receipt of the invoice. This issue was explained by individual interpretations issued by the directors of tax chambers, which confirmed that two consecutive periods for VAT deduction can also be counted from the date of receipt of the invoice.

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This was confirmed, inter alia, by The Director of the Tax Chamber in Katowice in his interpretation of September 16, 2013 (reference number: IPPP3 / 443-538 / 13-2 / LK) and the Director of the Tax Chamber in Łódź in the interpretation of April 11, 2014 (reference number: IPTPP4 / 443-43 / 14-2 / ​​JM).

The tax authorities in their interpretations uniformly assume that if the output tax has not been reduced by the input tax based on the original invoice, this right is granted in the settlement period in which a duplicate invoice was received or in two subsequent periods.

Import of goods and the right to deduct VAT in 2014

Import of goods is defined as the import of goods from the territory of a third country to the territory of the European Union. In the above case, the tax obligation rests on persons who:

• have been burdened with the obligation to pay customs duty, also in the case when, on the basis of customs regulations, the imported goods are duty free or the duty on the goods has been suspended, in part or in full, or a preferential, reduced or zero duty rate has been applied,
• entitled to use the customs procedure including inward processing, temporary clearance, processing under customs control, including persons to whom, in accordance with separate provisions, the rights and obligations related to these procedures have been transferred.

Under Art. 86 sec. 1 of the VAT Act, a taxpayer who uses the purchased goods to perform taxable activities has the right to deduct input tax on their acquisition. The taxpayer may therefore reduce the output tax by the amount of input tax on the import of goods.In such a case, the tax obligation arises when the customs debt arises, but not earlier than in the settlement for the period in which the taxpayer received the customs document (paragraph 10b point 1 of the VAT Act).

Transactions with a foreign contractor - an EU Member State - and the right to deduct VAT 2014

Import of services according to Art. 2 points 9 of the VAT Act, it is the provision of services for the performance of which the taxpayer is the recipient, referred to in art. 17 sec. 1 point 4 of the above-mentioned legal act. Import of services takes place when the following conditions are met:

• the service provider is a taxpayer who does not have a registered office or a permanent place of business, in the case of real estate services (Article 28e of the above-mentioned act), the taxpayer is not registered as an active VAT payer or is exempt from this obligation;
• the service recipient is: a taxpayer or a non-taxable legal person, registered or obliged to register for VAT-EU purposes (Article 28b of the above-mentioned Act); a taxpayer with a registered office or permanent place of business in the territory of the country or a non-taxable legal person established in the territory of the country and registered or obliged to register for the purposes of VAT-EU.

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Attention should be paid to the aforementioned Art. 28b and the general rule of the place of supply of services. Taxation on the import of services generally takes place in the country where the taxpayer is established. However, there are exceptions when:

• the service is provided for the customer's fixed place of business, located in a place other than his seat - then the place of taxation is his fixed place of business,
• the customer does not have a permanent place of business or seat of business - then the place of taxation is the place of residence or permanent residence,
• and exceptions to the rule set out in Art. 28 of the VAT Act apply to services related to real estate, transport, admission to cultural, sports and educational events, restaurant and catering services, short-term rental of means of transport and tourism services.

The principle that the taxpayer has the right to deduct input tax in the tax period in which the tax obligation for the import of services arose still applies. The tax obligation arises upon the performance of the service, unless the payment has been made in full or in part. Then, the tax obligation arises when the payment is made (Article 19a (8) of the VAT Act). As a result, an invoice is not needed to show the import transaction for services. All you need is a proof of payment, on the basis of which you can issue an internal proof as part of your business.

In connection with the above, and with reference to Art. 86 sec. 2 point 4 letter a above of the legal act, the amount of input tax is the amount of tax due for the provision of services for which, in accordance with Art. 17 sec. 1 point 4 or 8, the taxpayer is their customer, the taxpayer has the right to deduct the input tax in the period when the tax obligation arises, if he takes into account the amount of tax due in the tax return, in which he is obliged to settle it. On the other hand, if the taxpayer does not deduct the amount of input tax in the period in which the tax obligation arose, he has the right to do so in one of the two subsequent accounting periods. Most often, therefore, the deduction of VAT on the import of services is made in the same period in which there is an obligation to show the tax due on a given transaction. Basically, therefore, for active VAT payers, the settlement on the purchase and sale side makes the transaction neutral in terms of VAT.

Intra-Community acquisition of goods is the acquisition of goods understood as the acquisition of the right to dispose of, as the owner, goods that are shipped or transported to the territory of an EU Member State other than the country where the shipment or transport begins by the seller. In this situation, the amount of input tax is the amount of VAT due (Article 86 (2) (4) (c) of the VAT Act). The basic condition for the deduction of VAT by the taxpayer is the obligation to include the amount of input tax in the same tax declaration in which he is obliged to settle the output tax.

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Article 86 (1) 10b of the VAT Act tells us that the taxpayer will have the right to deduct the amount of input tax in the settlement period in which the VAT obligation arose. Pursuant to Art. 20 paragraph 5 above of the legal act, the tax obligation arises when the invoice is issued by the seller, not later than on the 15th day of the month following the month in which the goods were delivered. The taxpayer should receive an invoice for intra-Community acquisition of goods within three months from the end of the month in which the tax obligation arose, disregarding the exception of the movement of goods specified in art. 11 of the Act. According to Art. 86 sec. 10g, if the taxpayer has not received the invoice within the statutory deadline, he should reduce the amount of input tax shown earlier in the current settlement period. Reconciliation will be possible only when the entrepreneur receives an invoice confirming the intra-Community acquisition of goods.

Reverse charge - the buyer is a taxpayer and the right to deduct VAT 2014

In October 2013, a list of products subject to reverse charge in domestic transactions appeared. A taxpayer who purchases such goods should receive an invoice from the seller without the indicated VAT rate, because it is the buyer who should settle the tax on goods and services, regardless of whether or not he benefits from the exemption.

A taxpayer who uses the purchased goods for further taxable activities has the right to deduct the amount of input tax in the period in which the tax obligation arose. Moreover, the taxpayer should indicate the tax due on the reverse charge transaction in the tax return that he is obliged to submit (VAT-7, VAT7K, VAT-7D).

The situation is different in the case of taxpayers who benefit from the exemption - they do not have the right to deduct input tax. The amount of tax due will therefore be tax deductible at the time of payment. Such taxpayers, in order to settle the reverse charge transaction, should prepare a VAT-9M declaration, and the tax amount should be paid to the tax office account.

Utility invoices and the VAT deduction deadline in 2014

The changes introduced from January 1, 2014 meant that in the case of invoices for utilities, the payment date does not play a key role. According to Art. 19a paragraph. 5 pts 4 of the VAT Act, which regulates the moment of tax obligation on the part of the seller, the invoice issue date should be adopted.

As Art. 86 sec. 10 and 10b of the VAT Act, the right to reduce the amount of tax due by the amount of input tax arises in the settlement for the period in which the tax obligation arose in relation to the goods and services purchased or imported by the taxpayer, but not earlier than upon receipt of the invoice. However, if the taxpayer fails to deduct in accordance with the above provision, then pursuant to Art. 86 sec. 11 above of the legal act is entitled to a deduction in one of two consecutive accounting periods.