The right to issue invoices earlier in 2015
The year 2014 was a turning point for the issue of invoicing, as legislators introduced a lot of significant changes. One of them is the expiry of the regulation of the Minister of Finance on issuing invoices and transferring its regulations directly to the VAT Act. The provisions of the VAT Act from 2014 also include rights that previously did not exist in Polish legislation. Will be determined, among others rules for issuing invoices prior to the sale. The question is, will this option be beneficial for taxpayers?
General rules for issuing invoices
The new provisions in the VAT Act, in force since 2014, are a departure from the principle of identifying the emergence of a tax obligation at the moment of issuing an invoice. The following will be treated as exceptions: construction services, supply of electricity or the provision of media services (including telecommunications). Newly added Article 19a para. 1 says that the tax obligation arises when the goods are delivered or the service is performed. As regards the time limit for issuing the invoice, Article 106i para. 1 determines it at the latest on the 15th day of the month following the month in which the service was provided or the goods were delivered.
The deadline specified in the act has no bearing on the emergence of a tax obligation. The invoice issued on February 10 for the delivery of goods on January 25 does not mean that the need to settle VAT is shifted to the next period. The tax obligation arises in the month of delivery - i.e. in January.
The new regulations also apply to the date of documenting received advances and prepayments with invoices. Article 106i (1) 2 states: "If, prior to the delivery of the goods or the performance of the service, all or part of the payment has been received, (...) the invoice shall be issued no later than on the 15th day of the month following the month in which all or part of the payment was received from the buyer.". This introduces some freedom as to the date of issuing the invoice, because the taxpayer will not have to prepare the document within 7 days of its receipt, as it is now - this time will be significantly extended. In this case, the tax obligation arises at the moment of collecting the advance payment, which is regulated by the provisions of Article 19a para. 8.
Deadlines for issuing invoices in 2015
The amended act on tax on goods and services also introduces a new norm, which the legislator included in Article 106i para. 7:
"Invoices cannot be issued earlier than 30 days before:
1) delivery of goods or performance of a service;
2) receiving, prior to the delivery of goods or the performance of a service, all or part of the payment. "
Point 1) does not, however, cover the issuing of invoices for the delivery and provision of services referred to in Article 19a para. 3, 4 and sec. 5 point 4 (including continuous services and supplies, utilities, rental, permanent legal and office services), if the invoice contains information to which settlement period it relates.
The provisions therefore allow for an earlier issue of an invoice that does not document the delivery, service or receipt of payment. Thus, it does not imply a tax obligation for VAT purposes. Now let us consider the pros and cons of such invoices.
Advance Invoicing Benefits
The departure from unnecessary paperwork is a strong advantage of using the option to issue invoices up to 30 days before delivery or service. Currently, several documents can be issued for a single order. For example: a company deals in the sale of office supplies, so its contractor can issue three documents: a pro forma (as a commercial offer), an advance invoice after receiving the prepayment, and after the order is completed - the final invoice. You can replace all of these tickets with one. This is an invaluable saving of paper and toner for the printer.
Another plus is saving time. Let's take a look: issuing only one invoice instead of three separate ones will shorten the work by a few minutes. Taking into account the larger number of contractors, it is a significant time gain for the company. Self-employed entrepreneurs will be able to issue several invoices for future orders within one day. In this way, they will focus on completing transactions, not documenting them.
An entrepreneur who is planning a vacation will also feel the convenience of the new regulations. He will be able to invoice any deliveries of goods and services carried out during his absence before his departure. The situation is similar in the case of illness - a businessman on sick leave is not allowed to issue invoices, otherwise he will lose his entitlement to sickness benefit. Pre-invoicing is then the ideal solution - you can take care of everything before going on leave.
The buyer will also gain something from the new regulations. The advantage lies in the faster receipt of the document that entitles him to deduct VAT. It is true that the buyer has such a right only after the goods have been delivered or the service has been provided, but it is always easier and faster.
A tablespoon of tar in a barrel of honey - disadvantages of early invoicing
Unfortunately, apart from the advantages, there are also disadvantages. The most important of them is the issue of the moment when the tax obligation arises on the basis of income tax. Article 14 (1) 1c updof indicates that the date on which the revenue arises is the date on which the item is released or the (also partially) service is provided, no later than the day:
- issuing an invoice, or
- payment of receivables.
As far as we know, no changes in the provisions on the emergence of a tax obligation are expected in the near future. Currently, the moment of issuing the invoice obliges the taxpayer to show income and pay the advance payment, and not the fact of selling or providing a service.
When we read carefully the content of the VAT Act, we will find a provision that specifies the earliest possible date for issuing an invoice - 30 days before the delivery of the goods, performance of the service or receipt of the advance payment. This raises the question - what to do if the taxpayer does not meet this deadline or the sale does not take place at all? The Act on tax on goods and services does not regulate this, so reference should be made to Article 62 para. 1 of the Fiscal Penal Code, saying: "Who, contrary to the obligation, does not issue an invoice or a bill for the performance of the service, issues them in a defective manner or refuses to issue them, shall be subject to a fine of up to 180 daily rates". As we can see, the tax authorities are able to discipline taxpayers who do not comply with the provisions of the VAT Act with a financial penalty.
Another drawback of the new legal solutions is the question of the consequences of passing such a document to the buyer. Despite the undoubted benefits of prior invoicing, there is also a serious problem. The mere receipt of an invoice will not allow you to deduct VAT. So it turns out that entrepreneurs have to watch two dates: the receipt of the invoice and the delivery or service (recognition as performed). This will be because Article 86 para. 10 of the VAT Act reads as follows: "The right to reduce the amount of output tax 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."
The right to issue an invoice up to 30 days before deliveries, receiving an advance payment or providing this service should be treated as an option given to entrepreneurs by the legislator. The taxpayer must decide for himself - taking into account the aforementioned advantages and disadvantages - whether such a solution will be the best in his situation.