Bad debt relief in VAT

The life of an entrepreneur is not all roses, especially when it comes to paying taxes. Fortunately, there are provisions that allow the use of tax credits. In order to be able to use every possibility of reducing the tax base, and thus – also the amount of tax due – you only need to know these provisions. One of them is the relief for bad debts in VAT. In a situation where the buyer does not pay the amount due for the purchased goods or service, the seller may take advantage of the discount – for bad VAT debts.

Bad VAT debts – what you need to know

The rules quite clearly define the factors that must be met in order to be able to take advantage of vendor allowances for bad debts VAT. According to the provisions, 90 days must elapse from the date on which the payment was to be settled (and of course it was not). The above-mentioned 90 days must pass before the seller can submit a correction of the declaration – it is a necessary condition.
In terms of deadlines – another important information – there is a time limitation (Article 89a (2) (5) of the VAT Act), which in practice means that the relief for bad VAT debts can be applied if no more than 2 years have passed from the date of issuing the unpaid invoice ( counted from the end of the year in which this invoice was issued).

Bad VAT debts – regulations and precedent

You can learn many things yourself from the VAT Act, as long as you know the specific jargon. However, there are situations that a person from outside the environment may not know about – we are talking about precedents, i.e. in this case court judgments that may change the interpretation of the letter of the law. Until now, the provisions regulated certain important issues, which made it impossible to apply the bad debt relief if the specific conditions were not met, namely that on the day of sale and the day preceding the submission of the declaration:

  1. The debtor could not be in the process of bankruptcy, liquidation or restructuring;
  2. The debtor and the creditor had to be registered, active VAT payers (the creditor had to meet this condition the day before submitting the declaration).

    The above factors meant that the seller could not apply the tax credit for bad VAT debts if the debtor was in bankruptcy or liquidation (apart from the fact that the debt was not paid – in a sense it is a double loss).

Bad VAT debt relief – why use a professional accounting office

Most entrepreneurs are specialists in their industry, but few of them are experts in tax regulations. Therefore, it is not difficult to make a mistake in documents – or rather, no businessman wants to have trouble with the tax office. That is why it is best to go to professionals who have knowledge of taxes at their fingertips. They not only know the regulations, but also have knowledge of procedures, the functioning of offices and possible interpretations of numerous paragraphs. In addition, experts have information that opens up opportunities. You are an entrepreneur and you want to earn more and have peace of mind without worrying
about the tax office? Contact us – accounting and tax settlements are our natural environment.

JPK-V7

Still not ready for new JPK-V7?

From October 1, 2020, reporting of the Standard Audit File in the new JPK_VDEK structure will become mandatory. This is the last moment to prepare for the new requirements.

What to do if your company/accounting department did not manage to adapt the system to the new JPK-V7? Don’t panic, we can offer you an express solution that will give you time to adjust the system without incurring large initial costs.

BPO HOUSE in Poland offers support in the implementation of JPK_VDEK, which will protect the company from sanctions for failure to comply with obligations and at the same time minimize the costs and time associated with adapting tax and accounting systems.

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