If the debtor (also being an active VAT taxpayer) fails to pay part or all of his receivables within 90 days from the date indicated in the invoice, the creditor is entitled to reduce the taxable amount (or increase the input tax) on an ongoing basis in the appropriate part. The taxpayer may take advantage of the relief provided that no more than 2 years have passed since the end of the year in which the invoice was issued. The correction must be submitted to the tax office by attaching the VAT-ZD attachment to the VAT-7 (VAT-7K) form. At the same time, the debtor’s obligation is to reduce the tax base or increase the output tax by the deducted amount of tax resulting from the unpaid obligation.
PIT and CIT
The PIT and CIT Act provides for a mechanism enabling the taxpayer to reduce income or increase loss by the value of receivables included in the income, which were not settled by the debtor within 90 days from the date indicated in the invoice. The relief may be applied already when calculating monthly income tax advances. The relief may also be applied to the part of unpaid receivables.
The application of the relief for bad debts should be shown in the tax return submitted for the tax year in which the 90-day deadline for payment of the invoice expired. The right to reduce the tax base (increase the loss) is valid for 3 years from the end of the year in which the above deadline expired.
In principle, the debtor is obliged to increase the tax base by the liabilities previously classified as tax deductible costs. However, this does not apply to those debtors who meet the conditions specified in the Act introducing solutions under the Anti-Crisis Shield. This exemption will be available to those taxpayers whose revenues in the settlement periods of 2020 (monthly or quarterly) compared to the corresponding periods in 2019 will decrease by at least 50%. Liabilities that have not been settled during the year before the submission of the annual return for 2020 will be included by taxpayers in their annual return.
Upon request, we can assist you in the review of your claims from the perspective of the possibilities of applying the available reliefs.