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No more adjustment of tax-deductible costs in case of default in payment

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The Act amending the Tax Act of 5 August 2015 and some other acts repeals Article 15b CIT Act and Article 24d PIT Act with effect from 1 January 2016.

This will mean that the regulation governing the responsibility to adjust tax-deductible costs associated with unpaid invoices are to cease after two years since they were introduced regarding the obligation. Thus, ending the complex process of modification of unaccounted costs.

Situation before the change

Since 2013, taxable people were obliged to amend the tax-deductible costs connected to liabilities they failed to pay.

If the payment date was less than 60 days and the payment was not made within 30 days from the deadline, the taxable person was obliged to reduce the difference in the tax-deductible costs. If the payment date was longer than 60 days, the tax-deductible costs must be reduced after 90 days from the date on which they were acknowledged as tax-deductible.

The new regulations purpose is to eradicate payment accumulations and to progress better financial standing of businesses. However, the feeling is that the solution did not meet expectations.

How will the situation look like after the changes?

Once the changes come into effect, neither the agreed payment term nor the actual date of payment will matter. This is due to expenses disclosed in the accounting books being tax-deductible pursuant to general principles.

A debtor who fails to make the payment within 150 days, after the due date, will need to correct the deducted tax input resulting from the invoice (this will not refer to a debtor you is subject to bankruptcy or liquidation proceedings). The creditor will now be allowed to correct the output VAT, and to subtract documented bad debts or value alteration write-downs of receivables, with the funds not been able to collect being verified.

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