Cost records in the KPiR based on an advance invoice

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Pursuant to the regulations, the basis for recognizing expenses in tax deductible costs are accounting documents. The most popular of these are invoices or receipts. Among them, the advance invoice is not mentioned, but in practice, there may be conditions in accordance with the provisions, which allow for a derogation from the general rules. Is it possible to record the cost in the KPiR on the basis of an advance invoice?

Cost records in KPiR

As a rule, tax deductible expenses may be expenses related to the taxpayer's business activities, contributing to the income or securing its source. Except for the costs listed in Art. 23 of the PIT Act, which in no case may constitute a tax deductible cost.

The incurred expense should be properly documented. The basic evidence for this purpose is an invoice, but in exceptional circumstances a receipt may be used for this. In addition, the taxpayer should rationally justify the classification of a given expense as costs.

Tax authorities and the doctrine of tax law impose a certain additional condition regarding tax deductible costs, taking into account all applicable regulations. Including a given expense as tax costs is possible only when the expense is definitive (final and non-returnable).

Invoice - pattern with overview

The advance invoice is not posted to the Polish Accounting Register, neither at the time of its payment, nor at the time of its issuance. Only the final invoice will be the basis for recognizing the cost, including the advance payment. So why does the buyer need an advance invoice?

The advance invoice is not a cost in PIT, but gives the right to deduct VAT at the time of its receipt. Therefore, as a rule, the advance invoice is recorded in the VAT Register.

Advance payment and tax deductible costs in KPiR

Tax regulations do not refer directly to the recognition of advances in tax costs. On the other hand, the principle set by the tax authorities that the expenditure should be definitive will apply to the recognition of advance invoices in the KPiR.

The advance payment for the delivery of a good or service is generally not definitive as it can be returned before the delivery of the goods or the performance of the service. For this reason, it is not tax deductible. However, it should be noted that not every advance payment of a certain amount is understood as an advance payment. The nature of the payment is determined as a tax cost.

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Cost records in the KPiR based on an advance invoice

If the advance invoice covers the entire amount due, which is therefore the full VAT taxable amount for a given transaction, the taxpayer is not obliged to issue a final invoice. This also applies to several invoices documenting the received advances, if they were paid in parts, and together they amounted to 100% of the contract value. Such a position was adopted, among others, by Director of the Tax Chamber in Bydgoszcz in the individual ruling of 5 September 2014, ITPP3 / 443-323 / 14 / AT.

A self-employed taxpayer asked about renting an advertising stand. For this reason, he receives an advance invoice every month, but no final invoice is issued at the end of the calendar year. So, in such a situation, can expenditure documented only with advance invoices be included in the KPiR?

The situation described by the taxpayer shows that the advance invoice he receives is for the full amount of the monthly rent. At the same time, the landlord treats the advance paid by the taxpayer as such under the concluded contract and, as a result, does not issue the final invoice. In this situation, it should be considered that the advance payment takes the form of a definitive (final) expenditure. Due to the fulfillment of this condition and the above interpretation of the Director of the Tax Chamber in Bydgoszcz, despite the lack of the final invoice, such an expense can be recognized in the KPiR on the basis of an advance invoice.

Important!

In the case of 100% of the final invoice, the cost arises not at the time of issuing the invoice (as is the case with regular VAT invoices), but at the time of sale / purchase (receipt of goods delivery / service provision).

Summing up, the cost record in the KPiR based on 100% of the advance invoice is allowed by the tax authorities, which is confirmed by the issued individual interpretations. On the other hand, they refer to the individual situations of taxpayers against the background of specific facts, therefore, in order to be able to book the cost on the basis of an advance invoice, each case requires an individual assessment.