Tax Relief for Bad Debts in JPK_VAT

When settling VAT using the new JPK_VAT format, taxpayers can still benefit from the relief for bad debts, resulting from unpaid liability assumed as uncollectible. The essence of the relief is the reduction of the tax base for the supply of goods or services ordered within the territory of the country.

The key aspect of the bad debt relief is the time elapsed from the payment date of the unpaid invoice. From January 1st, 2020, in Polish law, the period after which the debt is considered uncollectible (the so-called bad debt) in VAT is 90 days.

Taxpayers with unpaid receivables will be able to declare the debt unpayable and reduce the VAT tax base after 90 days from the original payment date shown on the document confirming the debt. Thus, they may be taken into account when calculating the amount of relief due to VAT taxpayers.

Conditions

The relief for bad debts is crucial for VAT payers primarily because the tax obligation in VAT arises regardless of whether the taxpayer has received payment for a taxable sale or service.

The entrepreneur is entitled to the VAT relief only if all the following criteria are met.

• The claim may not be sold or settled within 90 days or until the day of applying for the relief.
• The unpaid sale has been made to an active and registered VAT payer.
• The sale has been made to a buyer who has not been in the restructuring, bankruptcy, or liquidation proceedings.
• The creditor and the debtor have been remaining active taxpayers registered as VAT taxpayers on the day preceding the day of applying for the relief.
• On the day preceding the day of applying for the relief, the debtor has not been the subject of the ongoing restructuring, bankruptcy, or liquidation proceedings.
• No more than two years have elapsed from the date of issuing the invoice, counting from the end of the year of issue.

Bad debt relief and JPK_VAT

The new JPK_VAT is a uniform control file consisting of a declarative and sales record component. The declarative part – JPK_V7M form monthly or JPK_V7K for the quarterly statement period – will replace the current VAT statement, while the sales record component is a continuation of the previously used JPK_VAT file.

To apply for the relief during the JPK_VAT filling, you should follow the steps listed below:

1. In the KorektaPodstawyOpodt column, select 1.
2. The correction amount should be entered in the fields corresponding to the tax rates (K_19, K_20) with a minus sign preceding the value.
3. The fields P_68 and P_69 in the declaration should be filled in with the total amount of the tax base correction and output tax.

Correction in JPK_VAT – when the amount due has been settled

Even receivables considered uncollectible may pay off one day, so it is important to remember to correct the JPK_VAT – by increasing the tax base by the amount repaid (or the amount of tax due for a given period).

In that case, one should select “1” in the KorektaPodstawyOpodt field, and make corrections separately for each value, with the division into the corresponding VAT rates.

Bad debt relief and the COVID-19 pandemic

The amendments to the Anti-Crisis Shield introduced a temporary provision limiting the period of declaring a debt non-repayable to 30 days. However, it applies only to PIT/CIT and flat-rate tax. The rules on VAT have not changed.

Due to the COVID-19 pandemic, the obligation for debtors to settle unpaid payments by the tax has been temporarily excluded. Therefore, during the settlement periods falling in 2020, the debtor will not be obliged to increase the income constituting the basis for calculating advances or the income constituting the basis for calculating the lump sum – provided that the following conditions are met:

1. the taxpayer is a small taxpayer within the meaning of the Income Tax Act (income in 2019 did not exceed 8 747 000 PLN);
2. the taxpayer has suffered negative economic consequences due to the pandemic.

Read more about the subject:

• Important information on JPK_VAT
• Full list of JPK_VAT registry codes