Installment payment and VAT correction
Installment purchase is a popular phenomenon among entrepreneurs. How to settle it on the basis of VAT? When is a taxpayer entitled to a VAT deduction? Is VAT correction obligatory for bad debt relief? We invite you to read.
Installment purchase and VAT deductions
There is no point in looking for separate provisions relating to installment purchase in the VAT Act. The taxpayer deducts VAT on the basis of the general principles contained in art. 86 sec. 10 of this legal act:
VAT Act Art. 86 sec. 10
"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."
Bad debt relief - VAT adjustment
Bad debts are discussed in Art. 89a and 89b of the VAT Act - the last article exhaustively describes the consequences under VAT in the context of input tax. If the debtor fails to pay the amount due under the invoice documenting the delivery of goods or the provision of services in Poland within 150 days of the expiry of the payment deadline (from the contract or invoice), then the debtor is obliged to correct the VAT amount deducted from the invoice, in the settlement for the period in which 150 days have passed from the date of expiry of the specified payment date.
For the debtor, the correction of the tax deducted VAT is not obligatory, as long as he has paid the given amount at the latest on the last day of the settlement period in which the 150th day has passed from the date of expiry of the assumed debt payment deadline.
In the event of partial settlement of the debt within 150 days from the date of expiry of the payment deadline, the VAT correction should only include the input tax, which falls on the unpaid part of the amount. If the taxpayer pays the amount due after making the VAT correction, he may increase the amount of the input tax in the settlement for the period in which he paid the amount due by the amount of the previously corrected tax. In the context of partially paid receivables - input tax can be increased for this part.
Bad debt relief and installment purchase
In the case of an installment purchase, bad debt relief may be granted only when 150 days have elapsed from the date of payment of a specific installment, and the contract concluded between the parties includes arrangements for payment in installments.