Additional tax liability in VAT - what is it and when does it occur?

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As a result of the amendment to the Act on Value Added Tax, from the beginning of 2017, an additional sanction for unreliable tax settlement was introduced into the tax system, resulting in the understatement of the tax liability or overstatement of the excess tax charged over the due tax to be returned or to be settled in the next settlement or refund periods. tax. This sanction is determined in a specific amount and in the cases specified in the provision. In today's article, we will present the circumstances in which the tax office may impose an additional tax liability in VAT.

When will the additional tax liability occur?

VAT sanctions are imposed in two main cases. It concerns situations where an unreliable tax declaration was submitted, as a result of which the tax liability was understated or the amount of the excess input tax was overstated, or when no VAT return was submitted and no tax was paid. If the above circumstances are detected and proven by the tax office, the authority determines the amount of incorrectly declared amounts in the correct amount, and then determines an additional tax liability of 30% of the amount of the understated tax liability or the amount of overstatement of the tax difference, input tax return or tax difference to be reduced tax due for the next billing periods.

The above principle also results in the conclusion that the authority is firstly obliged to determine the correct amount of the tax liability for a given accounting period. Only on the basis defined in this way, the additional tax liability is calculated and assessed.

Example 1.

The taxpayer did not submit a VAT-7 declaration for September. The tax office determined the amount of output tax to be paid to the office in the amount of PLN 9,000. Additional pecuniary obligation of PLN 3,000.

Example 2.

In the submitted VAT-7 declaration for August, the taxpayer showed a surplus of input tax over due tax in the amount of PLN 18,000. As a result of activities carried out by the tax office, it was determined that the excess tax amounts to only PLN 6,000. As a consequence, the amount of overestimation of the surplus is PLN 12,000. The additional pecuniary obligation will amount to PLN 4,000.

The presented regulations also describe a reduced, 20% remedial rate, which applies in the event that, after the end of the tax inspection or customs and tax inspection, the taxpayer submits a correction of the declaration taking into account the irregularities found and pays the amount of the tax liability or returns the undue amount of the refund or submits a tax declaration and paid the amount of tax liability

At the end of the analysis of various rates of additional tax liability, it should be noted that as a result of the amendment, the sanction rate was also introduced into the regulations in the amount of as much as 100% of the input tax amount. Such a restrictive sanction will apply to the extent that unreliable amounts result from invoices that:

  • were issued by a non-existent entity,

  • state activities that have not been performed,

  • they provide amounts inconsistent with reality,

  • they confirm actions that are absolutely unimportant or done for the sake of appearances.

Example 3.

In the VAT-7 declaration for September, the taxpayer showed a surplus of input tax over due tax in the amount of PLN 35,000. The tax authority determined that some of the purchase invoices were unreliable and stated activities that had not been performed. The value of the input tax from these invoices is PLN 5,000. The taxpayer will therefore be required to show the excess of input tax over the due tax in the amount of PLN 30,000 and to pay an additional tax liability of PLN 5,000.

Situations when additional tax liability does not arise

In addition to listing the circumstances causing the imposition of an additional tax liability, the new regulations also provide for cases where such a sanction cannot be imposed.

The first such case is when the taxpayer corrects the tax declaration or submits an overdue tax declaration and pays the amount resulting from the monthly settlement together with interest due for late payment, before the tax authorities initiate an inspection.

An additional tax liability will not arise also in the case when the understatement of the amount of the tax liability or the overstatement of the amount of the surplus of input tax over the amount due arose as a result of accounting errors made in the declaration and obvious mistakes or failure to recognize the amount of tax due or input occurred in the previous or subsequent accounting periods in relation to to the right. It can be said that these circumstances are based on errors made by the taxpayer in the tax settlement.

The last situation excluding the determination of an additional tax liability is the case when a natural person is liable under the Fiscal Penal Code for understating the amount of tax due or overstating the input tax. This condition expresses the general rule not to punish a person twice for the same act. As a result, if a penalty is imposed for a tax misdemeanor or crime, it is impossible to establish an additional tax liability.