VAT tax (part 9) - Right to deduct part II
Mixed sales - how to calculate the tax?
Although usually the goods or services sold by the entrepreneur are subject to VAT, there are situations in which the taxpayer may benefit from VAT exemption when selling. Then we also deal with mixed sales - and thus with specific methods of tax settlement. Despite the fact that he is an active VAT taxpayer, not with every purchase he will be entitled to a tax deduction on goods and services.
The taxpayer, when purchasing goods and services used for tax-exempt activities, cannot deduct input VAT. In this case, this fee increases its cost and the expenditure should be recorded in the gross amount in the appropriate accounting ledger. However, if the acquisition is used to obtain taxable income, VAT may be deducted.
For some purchases, it is not a problem to determine which type of income they serve - then the method of accounting for the tax charged to them is clear. However, if such a division is impossible - e.g. expenses for electricity or telephone will be difficult to separate - an appropriate proportion should be used.
The first proportion - the so-called preliminary - the entrepreneur sets as the ratio of the turnover obtained from exempt activities to the entire annual turnover. Data from the previous year are used. Then, the calculated proportion is used to deduct the tax on all "undefined" purchases, taking into account only the part that theoretically relates to taxable sales in the VAT purchase register. The amount of VAT not deducted from purchases together with the net price is recognized as costs.
Two exceptions have been distinguished from the above rule, according to which the tax value to be calculated should be determined in a different way. The first such exception applies to a situation where the taxpayer did not obtain a turnover from mixed sales in the previous year or the turnover was lower than PLN 30,000. In such a case, the amount of the initial proportion is estimated, according to the forecast value of exempt sales, by agreeing such a calculation with the head of the tax office.
The second exception, however, applies to situations where the proportion is within certain values specified in the VAT Act. The first, when the proportion exceeds 98% - then the taxpayer has the right to deduct all input tax from expenses. If, on the other hand, the proportion goes the other way and its value does not exceed 2%, then the entrepreneur completely loses the right to reduce the amount of tax due by input tax.
After the end of the tax year, the entrepreneur recalculates the proportion, this time the correct one, on the basis of the turnover from the year that has already ended. The result will be the basis for the correction of VAT - depending on whether the initial proportion was higher than the appropriate or lower, the taxpayer may obtain a tax refund or be required to pay the tax to the office.
Input tax correction
Random events and mistakes always happen, not sparing the tax issues. Therefore, the law provides for the possibility of correcting input tax that should not have been deducted.
The correction should be submitted to the office in the form of a corrective declaration. The amount of input tax, by which the output tax was unjustifiably reduced, should also be transferred to the office.
According to the current regulations, a very important issue is the need to correct the deducted VAT on expenses that have not been paid. The entrepreneur, as already mentioned, can deduct VAT in the period of receipt of the invoice or in the next two. In practice, most often purchase invoices are posted with the date they are issued, even when payment is deferred. Once such an obligation is settled, the problem does not exist. However, if the trader does not pay the debt within 150 from the date on which the due date of the document has expired, it is his responsibility to correct the tax deducted. For this purpose, no corrective declaration is submitted, but the tax sum is shown on the VAT-7 or VAT-7K declaration, submitted in the period in which the above-mentioned deadline has expired.
As you can see, the right to deduct input VAT is a privilege worth enjoying. Thanks to it, you can significantly reduce the amount of output tax that the entrepreneur has to pay to the office, regardless of whether he has exercised the right to deduct.