VAT refund - what should it be used for?

All VAT payers must keep records of their transactions. On the basis of the register of purchases and sales, they prepare a settlement declaration (VAT-7 or VAT-7K) on a monthly or quarterly basis, which includes both output VAT (sales) and input VAT (purchase). If the input VAT is greater than the output VAT, then there is an excess that can be recovered. You don't know how to develop it? Read our guide.

VAT refund to the bank account

If the taxpayer is not in arrears with the payment of tax liabilities, the VAT refund may be transferred to his account. After receiving the money, the entrepreneur has the right to use it freely. As a rule, the VAT surplus will be transferred to the bank account within 60 days of the declaration being delivered to the tax office. If the entrepreneur depends on time, he may submit an application for an accelerated return of tax on goods and services (VAT-ZT) together with the declaration. The waiting time will be reduced to 25 days.

Important! In the event of an expedited refund, the input VAT must be derived entirely from the paid invoices.

The waiting time for the transfer may also be extended to 180 days. This will happen when the taxpayer has not sold goods and services in a given tax period.

VAT refund to cover other tax liabilities

In the event of default with payment of tax liabilities, the VAT refund will be allocated to them in the first place. This will happen even if the taxpayer declares a willingness to obtain a surplus on the account. Recoverable VAT may also be used to settle:

• interest on tax arrears,

• interest on advances, specified in the decision issued pursuant to art. 53a of the Tax Code,

• current tax liabilities.

In a situation where the entrepreneur has settled all the above-mentioned liabilities, he may decide himself that he wants to allocate the VAT refund to future or other current tax liabilities. Then, together with the VAT-7 / VAT-7K declaration, he should submit a relevant application for the transfer of the surplus.

If the taxpayer does not apply for a VAT refund, the value of the excess VAT over the due tax should be transferred to the next settlement period.

VAT refund on credit

The entrepreneur may decide that he wants to transfer the excess tax to secure the repayment of the loan taken from the bank or SKOK. This possibility has been available since January 2013. Along with the declaration, the taxpayer must provide the tax office with an authorization for the return to be made to the bank or savings and credit union. The refund of VAT on credit has priority over the transfer of the surplus towards tax arrears and current liabilities and the execution of the seizure of receivables due to tax refund in enforcement proceedings, received by the tax authority after the date of submission of the return declaration. As for the time, the same deadlines apply as for the return of the excess VAT to the bank account (25, 60, 180 days).

VAT refund and the tax office

It is worth adding that the entrepreneur may divide the received surplus - e.g. apply for a part to be allocated to the account, and the rest for future tax liabilities. The tax office will check the correctness of the declaration. The legitimacy of a VAT refund is most often examined as part of checking activities, but there may also be other verification modes (inspection or tax proceedings). In case of doubt, officials may extend the return period.