VAT tax (part 10) - Excess of input tax over due tax


Active VAT payers are required to report tax on the goods and services sold. This is called output tax (due to the State Treasury). The amount of tax depends on the net price (without VAT) and the VAT rate for a given good / service:

Net price x VAT rate = VAT tax.

An entrepreneur registered as an active VAT payer has certain privileges in addition to the obligations to report VAT on sales. The main one is the possibility of reducing the tax due by the (input) tax on the company. Thanks to this, there may be situations in which the entrepreneur, despite the fact that he is a VAT payer, will not have to pay the tax due on sales to the Tax Office, due to the fact that in a given month the tax on purchases was higher than the tax on sales. Thus, there was a VAT surplus.

Ways of accounting for the surplus

The excess of input tax over due tax is shown in the VAT-7 declaration in item 50. The entrepreneur himself decides what to do with the excess, and there are two options:

  • transfer of the surplus to the next billing period,
  • declaring a refund to a bank account used for corporate settlements.

When deciding on the first option, the entrepreneur shows the surplus amount to be transferred to the next period in item 55. On the next declaration, he should rewrite this amount to item 37 as the amount of the excess from the previous declaration. Then, if in the next period the sales tax is higher than the one to be deducted from purchases, the surplus will be “consumed” and the entrepreneur will have to pay a smaller amount.Thus, if in a given period there was a surplus of input VAT on expenses, and the entrepreneur anticipates higher sales in the next period (and thus a higher sales tax), he may transfer the surplus to subsequent periods.

If the specificity of the activity shows that there are frequent VAT surpluses, in order not to accumulate amounts to be transferred from period to period, you can apply to the Tax Office for a refund of overpaid VAT. In this regard, the provisions set out three deadlines for tax return, assuming 60 days as essential. If the entrepreneur decides to apply for a refund, he marks it on the submitted VAT-7 declaration in item 51 and in one of items 52, 53 or 54 depending on the date of return.

The entrepreneur can combine both forms, i.e. make a partial return and a partial transfer of the surplus. However, care should be taken that the sum of the amounts in items 51 and 55 does not exceed the total amount of the surplus, i.e. the amount in item 50.

Tax refund rules and deadlines

The rules and deadlines for applying for a tax refund are included in the provisions of the VAT Act. The basic period of waiting for a return is 60 days. Every taxpayer is entitled to it, regardless of the type of purchases made or the rate of goods or services sold. In some cases, however, this deadline can be shortened or, what is worse, for the taxpayer, it will have to be extended.

The shortening of the waiting period for a VAT refund to 25 days may take place provided that the entrepreneur has paid all invoices, customs documents and other obligations that have been included in the VAT summary information. Therefore, only taxpayers who settle accounts on an ongoing basis have the right to apply for a faster refund of overpaid tax.

If the entrepreneur has an overpayment of tax and in the period for which the declaration is submitted, he has not performed any taxable activities - it is a sale - he cannot apply for a tax refund either on the accelerated date or on the basic date. While in a given settlement period the entrepreneur has not made a single taxable sale, but has made purchases related to taxable sales or, based on previous periods, has to settle the tax overpayment, he should declare the return within a period extended to 180 days.

Challenging a tax refund

The tax office may question the tax refund as a result of irregularities and then completely reject the refund application or grant only a partial refund that will actually be due to the entrepreneur after making corrections.

VAT surplus as property security

Since 2013, it is possible to recognize the excess tax to be refunded in VAT settlements as security for the entrepreneur's loan taken out at a bank or SKOK. For this purpose, the entrepreneur should submit an application to the Tax Office, in which he authorizes the office to transfer the overpayment from a given VAT-7 declaration in VAT towards unpaid liabilities with the bank.

The surplus of VAT on purchases over the tax due on sales can be used by the entrepreneur in various ways. Returned to the entrepreneur's account may be used to pay off current liabilities, transferred to the next period may result in the lack of the need to pay the tax despite higher VAT on sales than deducted from purchases, or credited towards the security may help the entrepreneur in obtaining a loan.