VAT deduction on purchases made with the card - what is worth knowing?

An increasing number of transactions made in economic turnover takes the form of non-cash. It is becoming a standard for entrepreneurs to use a payment card when making payments for purchases. Therefore, it is worth considering what consequences in terms of VAT deduction are caused by the fact that the buyer pays the invoice with the card. In the article, how is the deduction of VAT on purchases made with the card.

Tax obligation on the seller's side when paying by card

The right to deduct input tax is necessarily related to the tax obligation arising on the seller's side. Therefore, the provisions relating to the issue of tax liability should be analyzed first.

According to the general rule expressed in Art. 19a paragraph. 1 of the VAT Act, the tax obligation arises when the goods are delivered or the service is performed. In this case, the tax obligation is not related to the payment for the goods or service, therefore the fact of making the payment with a payment card does not matter.

This issue will be different when the buyer pays a prepayment / advance payment for the future delivery of goods or performance of a service. In this case, Art. 19a paragraph. 8 of the VAT Act, indicating that if, prior to the delivery of goods or the performance of the service, all or part of the payment was received, in particular: prepayment, advance payment, advance payment, installment, construction or housing contribution prior to the establishment of a cooperative right to a dwelling or premises for another purpose, the tax obligation arises upon its receipt in relation to the received amount, subject to paragraph 5 point 4.

The above means that in the case of advance payments, the tax obligation is related to the moment of receipt of the payment. Therefore, if the prepayment amount is made by means of a payment card, it becomes crucial to determine on which day we can talk about receiving the payment.

In order to clarify the doubts arising, it should be pointed out that the concept of "receipt of payment" should be equated with the possibility of the seller's disposal of funds. Basically, this happens when the money is credited to your bank account.

Example 1.

On November 30, the buyer made an advance payment for the future delivery of goods. He made the payment using a payment card. Funds from this transaction were deposited into the seller's bank account on December 1. In these circumstances, the tax obligation arose on December 1, so the seller will indicate the tax due on the received advance payment in the December tax return.

Payment by a payment card is important in the case of advance payments / prepayments for the delivery of goods or the provision of services. In this case, the tax obligation arises not on the date of payment by the buyer by card, but on the date of receipt of the amount due to the seller's bank account.

VAT deduction on purchases made with the card - tax refund deadline

As indicated in art. 86 sec. 1 of the VAT Act, the deduction of input tax on the purchase of goods and services is available to an active VAT payer who uses the acquired goods and services to perform taxable activities.

In the context of the above general rule, it should be noted that it does not make the right to deduct dependent on the method of payment (in cash, by card or bank transfer), or even on the actual payment made.

However, when it comes to the moment when the buyer obtains the right to deduct VAT, it arises in the settlement for the period in which a tax obligation arose with the seller for the goods and services purchased by the taxpayer, but not earlier than in the settlement for the period in which the buyer received the invoice.

As you can see, the fact of paying the invoice using a payment card is not determinant in the context of the right to deduct input tax.

For the deduction of VAT, it is important that the buyer has an invoice documenting the economic event and that the purchased goods and services are used for taxable activities. However, it is not important whether the payment is made with a payment card or in any other form.

It is worth pointing out, however, that the fact of paying the invoice with a payment card may have its consequences in the scope of the so-called accelerated VAT refund.

Let us remind you that the basic deadline for returning input tax is 60 days from the date of filing the tax return. Assuming that the statutory conditions specified in Art. 87 sec. 6 of the VAT Act, the taxpayer may obtain a refund within 25 days.

One of the conditions for a faster refund is that the payment of the amount due is made in full via the taxpayer's bank account at a bank established in the territory of the country or the taxpayer's account at a cooperative savings and credit union of which he is a member, indicated in the identification application, referred to in separate regulations.

The tax authorities find that the above condition is not met when the payment is made with a payment card (e.g. in a stationary store). For example, the Director of KIS, in the interpretation of January 17, 2019, No. like cash payment. This, in turn, means that the invoices paid in this way are not treated as fully settled through the bank account.

Payment of purchases with a payment card results in the loss of the right to obtain an accelerated VAT refund within 25 days from the date of submission of the settlement.

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Deduction of VAT on purchases made with the card and split payment

The issue of paying expenses with a payment card is also important in terms of the provisions governing the split payment mechanism.

Let us recall that pursuant to Art. 108a paragraph. 1a of the VAT Act, when making payments for the purchased goods or services listed in Annex 15 to the Act, documented by an invoice in which the total amount due exceeds PLN 15,000, taxpayers are required to apply the split payment mechanism.

Payment using the split payment mechanism is made in Polish zlotys using a transfer message provided by a bank or a credit and savings union, intended for making payments in the split payment mechanism, in which the taxpayer indicates:

1. the amount corresponding to all or part of the tax amount resulting from the invoice to be paid through the split payment mechanism;

2. an amount corresponding to all or part of the gross sales value;

3. the number of the invoice in relation to which the payment is made;

4. the number by which the supplier of the goods or service provider is identified for tax purposes.

If the circumstances referred to in Art. 108a paragraph. 1a of the VAT Act, the buyer must obligatorily make the payment by bank transfer. As a result, the payment of the invoice with the use of a payment card constitutes in this case an infringement of the provisions, which is additionally associated with a tax sanction.

Well, pursuant to Art. 108a paragraph. 7 of the VAT Act, if it is found that the taxpayer has made the payment in breach of para. 1a, the head of the tax office or the head of the customs and tax office shall establish an additional tax liability in the amount corresponding to 30% of the tax amount for the purchased goods or services listed in Annex 15 to the Act, shown on the invoice to which the payment relates. In relation to natural persons who are liable for the same act for a fiscal offense or for a fiscal offense, no additional tax liability is established.

If the buyer buys goods or services from Annex 15 to the VAT Act and the value of the purchase invoice exceeds PLN 15,000, payment by card is a violation of the law, which is associated with negative tax consequences.

It should be emphasized that the fact that the invoice is paid using a payment card does not affect the buyer's right to deduct the amount of input tax. However, this fact may have consequences in terms of other statutory regulations, such as faster VAT refunds or the split payment mechanism.