Settlement of corrective VAT invoices

A corrective invoice must be, as a rule, be issued by the taxpayer in cases where, after the invoice had been issued, a discount or a rebate was granted, goods were returned, the payment was refunded in whole or in part, the price was increased or if a mistake was discovered in the price, rate, amount of the tax, or in any other item of the invoice. The deadline for correcting VAT from an invoice correcting a sale depends in whether the correction is ‘in minus’ or ‘in plus’. The reason for making a correction is also important.

Correction ‘in minus’

In a situation where the tax base is decreased in relation to the tax base specified in the invoice issued with the tax amount declared, the taxpayer should decrease the tax base on the condition that they have, before the deadline for filing the tax return for a given accounting period, in which the purchaser of the goods or service received a correction, a confirmation of receipt of the correction by the purchaser. This is stipulated in Art. 29a clause 13 of the VAT Act. However, this rule only applies to such cases, as are described in Art. 29a clause 10 pt. 1-3 of the Act, i.e. where:

• after the purchase, a discount and decrease of the price was granted,
• the goods were returned of the advance paid before the purchase was returned.

Whereas, in a situation where the taxpayer receives the above mentioned confirmation after the deadline for filing a tax return for a given accounting period has lapsed, then he may take the invoice correction into account in the settlement for the accounting period during which he received that confirmation.

The provision of Art. 29a clause 13 of the VAT Act also applies in the event that a mistake was discovered in the tax amount specified on the invoice, and a corrective invoice was issued to the invoice in which the VAT amount declared was bigger than the one due.

Not in every case, however, is the fact of having a confirmation of receipt of the corrective invoice, necessary. The condition of the taxpayer having a confirmation of receipt of the corrective invoice is not applicable in the following cases:

1. in the case of export of goods, intra-community supplies and the delivery of goods for which the place of taxation is outside the territory of the state, and
2. in the case of sale of: electrical and thermal or cooling energy, pipe gas, telecommunications and radio communications services, as well as services specified in pt. 140-153, 174 and 175 of Appendix No. 3 to the VAT Act, e.g. services in the scope of water distribution, waste disposal.

However, due to the judgement of the CJEU on 26^th January, 2012, in the case C-588/10, as on 1^st January, 2014 the legislator added one more position to the above catalogue, where it is not necessary for the seller to bear a confirmation of receipt of the corrective invoice. According to Art. 29a clause 15 pt. 4 of the Act, this shall be the case, when the taxpayer has not received a confirmation despite the fact that he attempted to deliver the corrective invoice (and has this documented) and it will result from the documentation that the purchaser of the goods or services is aware that the transaction was executed on such terms, as are outlined on the corrective invoice. Then, the decrease of the tax base shall be effected not earlier than in the tax return filed for the accounting period, in which all the conditions specified in the indicated provision have been cumulatively fulfilled.

Correction of an advance payment invoice

In case of advance payments, the obligation to pay arises in proportion to the amount paid, irrespective of when the invoice confirming its receipt is issued. The rules for issuing advance payment invoices are specified in the VAT regulations.

In practice, there are situations, in which the seller, after receiving the advance payment, executes an advance payment invoice, which he corrects at the moment of giving out the goods (performing the service), while in the same time issuing an invoice for the whole amount. Such conduct is incorrect. It is a mistake to issue a corrective invoice for a properly executed advance payment invoice. A similar approach was presented by the Head of the Tax Chamber in Warsaw in the individual interpretation on 22nd March 2012, No. IPPP2/443-1423/11-4/RR.

Correction ‘in plus’

It may happen that a taxpayer, due to a mistake on the initial invoice, underestimated the tax liability. In such an event, he is obliged to issue a corrective invoice. The VAT regulations do not provide for rules for such cases, in which the taxpayer is obliged to increase VAT. In such a situation, correcting the tax by way of correction of the VAT return should be effected as soon as possible and, as a rule, in the return for the accounting period, in which the taxpayer underestimated the tax liability.

However, the Head of the Tax Chamber in Warsaw, in the individual interpretation on 4^th September 2013, No. IPPP1/443-1599/11/13-5/S/EK, stated that, if the reason of executing a corrective invoice in plus, arose after the initial invoice had been issued and was a new event, impossible to foresee at the moment of issuing the initial invoice, then such a correction should be settled currently (in the tax return for the accounting period, in which it was issued).

Time limit for settling the correction by the recipient

In the event that the purchase of the goods or services received a correction of the invoice, as described in Art. 29a clause 10 or clause 14, i.e. an invoice decreasing the amount of VAT, he shall be obliged to decrease the amount of tax calculated in the settlement for the period, in which he received this correction (Art. 86 clause 19a of the VAT Act).

If taxpayer has not reduced tax amount by the specified in the invoice to which the corrective invoice refers, and he is entitled to the right of said reduction, the reduction of the input tax amount is taken account of in settlement for the period in which taxpayer makes the said reduction. If the taxpayer has not reduced the tax amount which is then corrected, then there is no obligation to correct the tax.

Whereas, according to Art. 86 clause 19b of the VAT Act, in the case referred to in Art. 29a clause 15 pt 4 of the Act, the purchaser of goods or services will be obliged to reduce the input tax amount in settlement for the period in which he found out about conditions on which the transaction was made.

However, if the purchaser received a correction ‘in plus’, then VAT will be settled on general terms, i.e. in the month of its receipt (or in the settlement for one of two following accounting periods).

Source: Gazeta Podatkowa of 26^th June, 2014