When to include a credit note for an invoice that documents a sale that did not actually occur

Service-Tax

Letter of October 5, 2007 Tax Chamber in Wrocław PP II 443/742/06 / KW / 41669

In the settlement for which month should be included the corrective invoice "in minus" regarding the invoice documenting the sale, which in fact did not take place, or in the month of receipt of the confirmation of receipt of the correcting invoice, or in the month in which the original invoice was entered

Confirmation of receipt of the correcting invoice to the invoice issued pursuant to art. 108 sec. 1 of the VAT Act does not constitute the basis for reducing the amount of tax due in the settlement for the month in which the seller received this confirmation.

The party in the submitted application informed the commune that after the termination of the contract for the provision of the lease service, it mistakenly issued a VAT invoice for this activity. The invoice was sent to the former contractor and thus introduced into legal circulation. The commune included the invoice in the VAT-7 declaration and paid the resulting tax. As it was not possible to cancel the invoice, an "in minus" correction was issued, then the correcting invoice was sent to the former contractor and the municipality received confirmation of receipt of the invoice in question.

In connection with the above, the commune formulated the question: in the settlement for which month should be included the corrective invoice "in minus" concerning the invoice documenting the sale, which in fact did not take place, whether in the month of receipt of the confirmation of receipt of the correcting invoice, or in the month in which the invoice was entered primary.

In the opinion of the Taxpayer, in a situation where the service has not been provided, the VAT invoice has been introduced into legal circulation, and the due tax resulting from this invoice has been transferred to the Tax Office, the only option is to correct the invoice. Correcting invoice issued to a VAT invoice documenting the sale, which in fact did not take place, should be settled in the month in which the invoice was entered and the due tax was paid.

After analyzing the request, the Head of the Lower Silesian Tax Office in Wrocław issued a decision finding the party's position to be incorrect. In the justification of the decision in question, the tax authority of first instance stated that pursuant to Art. 108 sec. 1 of the Act of March 11, 2004 on tax on goods and services, in the event that a legal person, an organizational unit without legal personality or a natural person issues an invoice in which the tax amount is shown, is obliged to pay it. However, this does not exclude the possibility of canceling an incorrectly issued invoice. Therefore, in a situation where the sales contract has not been performed, the VAT invoice has not been introduced into legal circulation, and the seller has both the original and a copy of the sales document in his documentation, it is possible to cancel the VAT invoice by making an annotation invalidating the invoice, which will prevent its re-release. However, in a situation where the invoice has been delivered to the contractor and it is not possible to cancel it, the only option will be to correct the invoice according to the rules set out in the regulations. The first instance authority referred to the judgment of the Supreme Administrative Court, ref. III SA 1715/99 of December 19, 2000, as well as the judgment of the Provincial Administrative Court ref. III SA 238/03 of June 7, 2004, in which it was stated, inter alia, that "it is necessary to accept the taxpayer's right to withdraw from trading an incorrectly issued sales document, without incurring negative tax consequences, which may occur by canceling this document or issuing a corrective document ".

The tax authority of the first instance indicated that the correction is admissible despite the fact that the provisions of § 16 and § 17 of the Regulation of the Minister of Finance of May 25, 2005 on tax refund to certain taxpayers, advance tax refund, rules for issuing invoices, how to store them and the list of goods and services to which VAT exemptions do not apply (Journal of Laws No. 95, item 798, as amended) do not directly provide for the possibility of issuing a correcting invoice in the event of an invoice being issued by mistake. Pursuant to § 16 sec. 4 of the quoted regulation, the seller is obliged to have a confirmation of receipt of the correcting invoice by the buyer. Confirmation of receipt of the correcting invoice is the basis for reducing the amount of tax due in the settlement for the month in which the seller received this confirmation, and in the case of taxpayers referred to in art. 99 sec. 2 and 3 of the Act in the settlement for the quarter in which they received this confirmation, taking into account the principles referred to in Art. 21 sec. 1 of the act. Therefore, in the opinion of the tax authority of the first instance, in a situation where the taxpayer mistakenly issued an invoice documenting the lease service that was not provided, introduced it to legal circulation by sending it to the former contractor and then issued a correcting invoice and received confirmation of receipt of this correction, should include the correction invoice "in minus" in the settlement for the month in which the confirmation was received.

When assessing the answer provided by the Head of the Lower Silesian Tax Office in Wrocław, the Director of the Tax Chamber in Wrocław, acting under the supervision procedure pursuant to Art. 14b of the Tax Ordinance Act initiated proceedings to change the interpretation in question.

First of all, it should be noted that the interpretation provided by the first-instance authority, as well as the assessment of its correctness made by this decision, refer to the facts presented by the applicant and the legal status in force from the date of the application to the date of the decision under appeal. In the light of the factual status being assessed in conjunction with the applicable provisions of law, the interpretation given by the first instance authority as to the scope and manner of applying tax law should be considered incorrect.

The tax authority of the second instance, similarly to the tax authority of the first instance, indicates that Art. 108 sec. 1 of the Act of March 11, 2004 on tax on goods and services (Journal of Laws No. 54, item 535, as amended), according to which, in the event that a legal person, organizational unit without legal personality or a natural person issues an invoice showing the amount of tax is obliged to pay it. It follows from the above provision that each entity that issues an invoice, if it shows the amount of tax in it, is obliged to pay it. The invoice issuer is obliged to pay the tax indicated on the invoice also when the given activity is outside the scope of VAT taxation or when the invoice does not reflect any transaction at all. The above results from the special role of the invoice in the common VAT system - for the taxpayer receiving the invoice, it becomes the basis for reducing the output VAT. As the invoice issued by the taxpayer contains the indicated tax amount and has been introduced into legal circulation, the taxpayer is obliged to pay the tax indicated therein.

Bearing in mind the above, the appeal body indicates that both the taxpayer and the tax authority of the first instance acted incorrectly by identifying the tax indicated in the invoice documenting the sale, which in fact did not take place, with the category of output tax within the meaning of Art. 99 sec. 1 in connection with sec. 12 of the Value Added Tax Act. From the provisions of the act on tax on goods and services, it can be inferred that the tax due is a tax that must be paid for the performance of a taxable activity and is reduced by the amount of input tax referred to in art. 86 of the Act. Such a tax is certainly not the tax shown on the invoice in question, therefore it cannot increase the output tax, which has an impact on the amount of the tax liability, the amount of the tax difference refund or the surplus of input tax over the due tax to be transferred to the next tax period, because in accordance with art. . 108 sec. 1 of this act is subject to payment (payment) in full.

Bearing in mind the judgment of the Provincial Administrative Court in Wrocław of June 22, 2005, file ref. I SA / Wr 3417/03 referring to the legal status in force under the Act of 8 January 1993 on tax on goods and services and excise duty, but applicable in the case in question, the institution of the obligation to pay the tax in the event of issuing the invoice referred to in art. 108 sec. 1 of the act on tax on goods and services differs from the institution of tax settlement under the tax declaration referred to in art. 99 of the cited act. In the case of issuing an invoice that documents a taxable activity and creates a tax obligation and tax liability, the taxpayer is obliged to include the tax shown on the invoice as part of the declaration referred to in art. 99 of the VAT Act, from which the tax liability arises, the amount of the tax difference refund, the amount of the input tax refund or the tax difference referred to in art. 87 sec. 1 of the cited act. On the other hand, the obligation to pay the tax in the case of issuing the invoice referred to in Art. 108 sec. 1 of the Act remains outside the provisions of the events that give rise to the tax obligation in the tax on goods and services pursuant to Art. 19 of the Act. Article 108 (1) 1 of the Act indicates that if the entity mentioned in the provision issues an invoice in which it shows the amount of tax, it is obliged to pay it. Such wording of the provision indicates that even if the activity mentioned in the invoice issued in this way is not subject to taxation, the tax resulting from the invoice is still payable regardless of whether the issuer of the invoice is a taxpayer that accounts for this tax on general principles, a taxpayer exempt from the subject or object, whether it is also outside the circle of taxpayers of this tax. (VI VAT Directive, edited by K. Sachs, C.H. Beck Warsaw 2004, p. 518, Tomasz Michalik VAT 2005 Commentary, C.H BECK Warsaw 2005, p. 691).

Therefore, in the opinion of the appeal body, the settlement of the tax from the invoice issued by the commune documenting the actually not performed activities should not be made as part of the VAT-7 tax return. The basis for the payment of the tax is the invoice, as it meets the hypothesis of art. 108 sec. 1 of the act. This provision creates the obligation to pay the tax indicated in the invoice in isolation from the regulations on the tax obligation and tax liability, it is about the obligation to pay the tax and this is an obligation specified in this provision, in particular with no relation to institutions such as calculating and paying tax for monthly periods. , and shaping the tax liability according to specific relations between output and input tax. The invoice issued in the above-mentioned procedure is also subject to the provisions regulating the rules of their correction.

As for the mode and method of accounting for the tax contained in the document referred to in Art. 108 sec. 1 of the VAT Act of 2004, it should be stated that this tax should be settled on general principles resulting from the provisions of the Act, ie Art. 103. According to that provision, taxpayers are required to pay the tax for monthly periods, without being summoned by the head of the tax office, by the 25th day of the month following the month in which the tax obligation arose to the account of the tax office. However, Art. 99 of the Act. In this case, the tax obligation is related in a special way to the very fact of issuing the invoice.

Bearing in mind the above, it should be indicated that the taxpayer acted incorrectly in showing the tax due from the invoice issued under art. 108 sec. 1 of the VAT Act as part of the VAT-7 tax return - identifying the tax resulting from the invoices with the tax category referred to in art. 99 of the Act. The director of the Tax Chamber in Wrocław indicates that the tax resulting from an invoice to which the provisions of Art. 108 sec. 1 of the Act is a tax that the issuer of the invoice is obliged to pay - due to the fact that the invoice is issued and introduced into legal circulation. In view of the above, also the invoice correcting the invoice issued under Art. 108 sec. 1 of the Act cannot be "settled" by the Wrocław Commune in the VAT-7 declaration. The issuance of a correcting invoice has the effect that its introduction into legal circulation allows to reduce the financial (economic) effects of issuing an empty invoice.

The director of the Tax Chamber in Wrocław indicates that pursuant to Art. 14b § 5 point 2 of the Tax Ordinance, the appeal body, by way of a decision, changes or repeals ex officio the decision referred to in Art. 14a § 4 of the Tax Ordinance, if the decision grossly violates the law, the case law of the Constitutional Tribunal or the European Court of Justice, including if the inconsistency with the law results from a change in regulations. Bearing in mind the above, it should be stated that the premise for changing or revoking the decision issued under Art. 14a of the Tax Ordinance is, among others gross violation of the law, which on the basis of these proceedings may be classified as a defective and unacceptable interpretation of the provision.Since the essence of the issued decision is the interpretation of the provision, then making it unacceptable and contrary to the rules of interpretation meets the premise of Art. 14b § 5 point 2 of the Tax Ordinance, as the decision may be considered gross violation of the law. In the case under examination, the authority of the first instance incorrectly interpreted the provision of Art. 108 sec. 1 in connection with Art. 99 of the Act on tax on goods and services of March 11, 2004 and § 16 of the Regulation of the Minister of Finance of May 25, 2005 on tax refunds to certain taxpayers, advance tax refunds, rules for issuing invoices, how to store them and the list of goods and services, to which exemptions from tax on goods and services do not apply. Contrary to the opinion of the tax authority of first instance, confirmation of receipt of the corrective invoice for the invoice issued pursuant to art. 108 sec. 1 of the VAT Act does not constitute the basis for reducing the amount of tax due in the settlement for the month in which the seller received this confirmation, because, as indicated above, the provision of art. 108 sec. 1 of the cited act creates the obligation to pay the tax indicated in the invoice in isolation from the regulations concerning the tax obligation and tax liability. Issuance of a correcting invoice by the taxpayer - after effective delivery to the recipient, however, entitles the issuer to apply to the locally competent tax office with a request for overpayment pursuant to art. 75 of the Act - Tax Ordinance, provided that the tax is paid in advance.

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Journal of Laws 2011.177.1054: Art. 108 sec. 1