Poland. Bad debt relief in VAT

The bad debt relief is a privilege of VAT payers, whose clients do not pay in a timely manner for purchased goods or services. On the other hand, in relation to debtors, it introduces the obligation to correct the deducted input VAT resulting from unpaid invoices.

Conditions for using the bad debt relief

The taxpayer may correct the tax base and the tax due on the supply of goods or services in the case of payments not settled within 90 days from the payment deadline date specified in contract or invoice. However certain conditions must be met:

  1. the supply of goods or services is made to an active VAT taxpayer who is not undergoing restructuring proceedings, bankruptcy proceedings or liquidation,
  1. on the day preceding the day of submission of the tax declaration in which the adjustment is made:

    a) the creditor and debtor are active VAT taxpayers,

    b) the debtor is not undergoing restructuring or bankruptcy proceedings or is being wound up,
  1. 2 years have not elapsed from the date of issuing the invoice (counted from the end of the year in which it was issued)

Correction at the creditor’s

The correction shall be made in the settlement for the period in which the 90th day has passed from the date of expiry of the payment deadline arising from the contract or invoice. In addition, the creditor must submit a correction notice to the tax office informing about the correction amounts and the debtor’s details on the VAT-ZD form.

Correction at the debtor’s

In the event of lack of payment of amounts due resulting from an invoice documenting the delivery of goods or services within 90 days from the payment deadline specified in the contract or invoice, the debtor is obliged to correct the deducted input tax resulting from this invoice, in the settlement for the period on which the 90th day passed.

This obligation does not apply if the debtor settles the amount due at the latest on the last day of the billing period in which the 90th day has expired. If the amount due is partially settled, the correction will apply to VAT falling on the unregulated part of the amount due.

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