Service-Tax

VAT deduction - how to do it and in what period?

If an active taxpayer purchased goods or services, and the purchase was used for activities carried out by him subject to VAT, he has the right to deduct VAT - which results directly from Art. 86 sec. 1 of the VAT Act. Therefore, it is worth knowing in what period it is possible to deduct VAT and what changes related to it are introduced by SLIM VAT 2. The article will also address the issue of, inter alia, how to deduct VAT in the case of receiving a correcting invoice, using the VAT cash method or issuing a VAT RR invoice.

VAT deduction - basic information

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 on the part of the seller has arisen for the goods and services purchased or imported by the taxpayer in accordance with art. 86 sec. 10 of the VAT Act, but not earlier than for the period in which the invoice was received. If the taxpayer fails to reduce the amount of tax due within the above-mentioned period, as a rule, the taxpayer may deduct VAT in the tax return:

for one of the three consecutive billing periods - in the case of monthly settlement;
for one of the two consecutive billing periods - in the case of quarterly settlement.

As a rule, the tax obligation with the seller (in accordance with the general rule) arises on the date of delivery, service performance or receipt of payment - depending on which of the events occurred first. For the buyer, this means that, in principle, the right to deduct will apply after receipt of the goods or completion of the service, but not earlier than on the date of receipt of the invoice.

Example 1.

Ms Grażyna is an active VAT payer (monthly settlement) and she purchased a computer for her business.She received an invoice from the seller with the date of issue on September 25, 2021 (she also received it on that day) and the date of sale on September 23. During what period will Mrs. Grażyna be able to deduct VAT?

Ms Grażyna will be able to deduct VAT on September 25, 2021. If she does not deduct VAT within this period, she will be able to make the deduction in October, November or December.

Example 2.

Mr. Krzysztof is an active VAT taxpayer (quarterly settlement), he receives invoices for deliveries of goods every month. Recently, he received an invoice with the date of issue on September 10, 2021 (he also received it on that day) and the date of sale on September 20. During what period will Mr. Krzysztof be able to deduct VAT?

Mr. Krzysztof will be able to deduct VAT no sooner than on September 20, 2021. This is due to the fact that on that day a tax obligation will arise with the seller. If he does not do it within the indicated deadline, he will be able to make the deduction in the fourth quarter of 2021 or the first quarter of 2022.

It is worth recalling that the extension of the VAT deduction to three consecutive settlement periods (in the case of monthly VAT settlement) was introduced by SLIM VAT. Previously, i.e. until December 31, 2020, there were two settlement periods.

Pre-transaction invoice and VAT deduction - special provisions

As described in the previous paragraph, issuing an invoice prior to the sale may have an impact on the deduction of VAT at the buyer. The buyer may deduct VAT in the settlement for the period in which the tax obligation arose on the goods and services purchased or imported by the taxpayer. The key here is the "tax obligation", because in special cases it arises on the date of the invoice. The situations in which the tax obligation arises on the date of issue are described by the legislator in Art. 19a paragraph. 5 points 3 and 4 of the VAT Act and they are:
providing construction or construction and assembly services;

delivery of printed books, excluding maps and leaflets - and newspapers, magazines and printed magazines, with the exception of the supply of goods referred to in art. 7a paragraph. 1 and 2, made to the taxpayer facilitating the delivery of goods and by that taxpayer;
activities consisting in printing books - with the exception of maps and leaflets - and newspapers, magazines and magazines, with the exception of services to which art. 28B, which are the import of services;
supply of electricity, heat or cooling energy and line gas;
provision of services:

telecommunications;
listed in item 24–37, 50 and 51 of Annex 3 to the Act;
rental, rental, leasing or similar services;
protection of persons and services of security, supervision and storage of property;
permanent legal and office services;
distribution of electricity, heat or cooling and line gas.

Therefore, when the taxpayer receives a purchase invoice that documents the future sale and belongs to the above-mentioned catalog, the tax obligation arises on the date of its issue. This means that the taxpayer will be able to deduct VAT from the date of receipt of the invoice, even if it took place before the sale.

Example 3.

The taxpayer received an invoice for the car lease issued on October 15, 2021, with the date of sale on October 25. During what period will he be able to deduct VAT?

The tax obligation on the seller's side arose on the invoice date, i.e. October 15, due to the fact that the sale concerns a leasing service. The taxpayer will have the right to deduct VAT on the date of receipt of the invoice or in one of the three consecutive billing periods if it makes monthly settlements, or two if it makes quarterly settlements. The sale date is irrelevant in this case.

Deduction of input VAT by correcting the return

If the taxpayer has not deducted VAT in the applicable period, then in order to be able to exercise this right, he should submit a correction of the declaration (in the JPK_V7 file you need to correct the declaration and registration part) for the period in which he received the invoice or - from October 1, 2021 in connection with the entry SLIM VAT 2 - a correction is possible to deduct VAT in one of the settlement periods in which it was possible to deduct VAT. Importantly, the correction of the JPK_V7 file does not need to be accompanied by a written justification for submitting the correction.

Pursuant to Art. 86 sec. 13 of the VAT Act, when making corrections to the original tax return, the taxpayer has the right to deduct VAT up to 5 years back.

Example 4.

Mrs. Alicja settles VAT on a monthly basis. She purchased a marketing service in October 2021 and thus received an invoice documenting it on October 14, 2021. She forgot to deduct VAT and only remembered about it in March 2022. During what period could it be able to deduct VAT?

Due to the fact that the acquisition took place after the change in regulations due to SLIM VAT 2, Ms Alicja has the right to deduct VAT as part of correcting the JPK_V7 file for the period of October, November or December 2021 or January 2022. Therefore, Mrs. Alicja is free in this respect and can choose in what month she wants to do it.

Correction invoice and the date of VAT deduction

If the received corrective invoice is "positive" (the so-called increasing correction), then the VAT deduction is made according to the general rule, i.e. in the settlement for the period in which the tax obligation arose to the goods and services purchased or imported by the taxpayer, but not earlier than for the period in which the correcting invoice was received. Basically, the deduction of VAT occurs on the date of receipt of the correcting invoice or in three consecutive settlement periods, if the taxpayer is billed monthly, or in two, if it is billed quarterly.

If the invoice is "in minus" (the so-called downward correction), the deduction of VAT takes place on the date of obtaining documentation confirming the arrangements and meeting the conditions of the correction. The entry is made on the basis of the received corrective invoice. However, if the buyer does not receive it, he will have to reduce the VAT on the date of obtaining the above-mentioned documentation. This reduction in the JPK_V7 file is marked with the symbol "WEW" due to the fact that the buyer does not have a correcting invoice. Importantly, the subsequent receipt of the correction does not necessitate the correction of the entry in the records - in this case, the documentation determining the conditions for the correction is the basis.

In the case of "negative" corrections, there is no shifting the reduction of VAT to subsequent accounting periods.

Example 5.

On October 16, Mr. Władysław made the findings of the correction and thus, as part of the mailing, he obtained documentation confirming it. Until October 20, he did not receive a correction invoice. Can Mr. Władysław reduce the input VAT on the basis of an internal ID issued in connection with the documentation he has?

Yes, because in this situation the documentation itself and thus the internal document issued to it authorize the reduction of input VAT. The entry should be made on October 16 and marked with "WEW" in the JPK_V7 file.

Example 6.

Mr. Władysław from example 5, however, received a correcting invoice on October 25. On what date should he make the reduction of VAT?

Although Mr. Władysław received the invoice on October 25, he should reduce the VAT on October 16, 2021, i.e. on the date when he obtained the documentation confirming the conditions of the correction.

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RR VAT invoice - VAT deduction by the buyer

The VAT RR invoice is issued when the seller of services is a flat-rate farmer and the buyer is an active VAT payer. Such a sale should be documented by the buyer of the goods and services. Lump sum tax refund may be deducted by the buyer for the period in which the taxpayer made the payment. However, he must meet the following conditions, as indicated in Art. 116 sec. 6 of the VAT Act:

payment of amounts due for agricultural products was made to the flat-rate farmer's bank account or to his account in the cooperative savings and credit union of which he is a member;

the purchased agricultural products were related to a taxable supply;
the document confirming the payment of amounts due for agricultural products will include the number and date of issuing the invoice confirming the purchase of these products, or the invoice confirming the purchase of agricultural products provides the identification data of the document confirming the payment.

In connection with the above, if the above conditions are met, the buyer has the right to deduct VAT on the date of receipt of the invoice or on the date when the tax obligation arises. If it does not deduct VAT within this period, then it can normally do so within three consecutive settlement periods, if it is billed monthly, or in two, if it is billed quarterly.

Deduction of VAT from invoices of small taxpayers (cash method)

Pursuant to Art. 86 sec. 10e of the VAT Act, the right to deduct VAT charged by small cash-based taxpayers arises not earlier than for the period in which the taxpayer makes payment for goods or services. Therefore, if a taxpayer who settles using the cash method receives an invoice, then as long as he does not pay it, he is not entitled to deduct VAT. If the taxpayer does not deduct VAT on the payment date, it can normally deduct VAT in three consecutive billing periods when billed monthly, or two when billed quarterly.

If the taxpayer does not settle with the cash method and receives an invoice marked "cash method", he may deduct VAT not earlier than for the period in which he paid for the invoice. So, in the same way as if you were billing using the cash method. Additionally, in the JPK_V7 file, such an invoice should be marked with the symbol "MK".

Example 7.

Ms Mariola received an invoice with the annotation "cash method" on September 14, 2021. It did not pay until October 2, 2021. When will she be able to deduct VAT?

Mariola will have the right to deduct VAT on the invoice payment date, i.e. October 2, 2021, or in three subsequent billing periods if she makes monthly settlements, or in two, when she makes quarterly settlements.

VAT deduction in the wFirma.pl system

The VAT taxpayer can easily control the deduction of VAT thanks to the wFirma.pl system. There is a field BOOKING DATE FOR VAT, thanks to which you can indicate exactly the period in which the taxpayer wants to deduct it. To add an expense in the system, go to the tab: EXPENDITURE »ACCOUNTING» ADD »VAT INVOICE. In the expense adding window, enter the contractor's data, complete the required dates and the invoice number. The key value for VAT is the VAT ACCOUNTING DATE, because in it the invoice will be entered in the VAT register of purchases. Additionally, the correct type of expenditure must be selected.

After saving, the invoice will be automatically posted to the appropriate KPiR column - on the date of posting to PIT, and also to the purchase VAT register - on the date of posting to VAT.