Cash method 2013
The year 2013 brought changes not only to large entrepreneurs but also to small taxpayers using the cash method for VAT purposes. The third deregulation act introduced changes long awaited by taxpayers. So far, the cash method used in the regulations was in fact a "pair" of cash, because the tax obligation arose theoretically at the time of payment (or partial payment), but if after 90 days the payment was not received, despite settling the cash method, the entrepreneur had to show the tax due on sale, even when in fact payment has not been received.
From January 2013, the provisions on small cash-based taxpayers were amended ...
Who is a small VAT taxpayer?
It is an entrepreneur whose sales value in the previous or current tax year did not exceed:
- PLN 4,999,000 (EUR 1,200,000);
- PLN 185,000 (EUR 45,000); and who declared the cash settlement method on the VAT (VAT-R) registration application.
Therefore, not every small taxpayer accounts for the cash method.
VAT due on sales - when will the tax obligation arise?
The main feature that distinguishes a small taxpayer using the cash method compared to other entrepreneurs is the moment when the obligation to pay the VAT due arises, which falls on the date of payment for goods or services. In this matter, everything has been left as old as the old ones, but the regulations regarding the situation when a contractor does not fulfill his obligations have changed - and they are included in Art. 21 of the VAT Act.
If such a "bad" contractor is an active VAT payer, the rule is simple - there is no payment, there is no tax obligation (paragraph 1 point 1). The amendment abolished the 90-day deadline for settling the tax due in such a situation. However, be careful because there is a minus in the regulations - when the contractor is not an active VAT taxpayer, the seller has a period of 180 days from the date of delivery of the goods or provision of the service, after which he must settle the VAT due to the office (paragraph 2 point 1) . This means that in the case of a sale to a non-VAT payer, the changes to the regulations left the obligation to prove the tax even in the case of non-payment, but extended the period of this obligation twice from 90 to 180 days.
One should not forget about the catalog of activities that are always settled on general principles, even when performed by a small taxpayer (paragraph 6 of the above-mentioned art).
What about input VAT on purchases?
Similarly to the principle of accounting for output VAT when selling to a VAT payer, a small taxpayer accounts for input tax. The deduction is made in the quarter in which he settled the amount due for the purchased goods or services. This principle has been - in accordance with the new regulations - extended to include the possibility of settling VAT with partial payment of receivables. Pursuant to Art. 86 sec. 16 of the VAT Act, when part of the amount due is settled, the small taxpayer has the right to settle a part of the VAT corresponding to the amount paid.
However, it should be remembered that the settlement of the input VAT cannot take place earlier than on the day of receiving the invoice from the contractor.
Small taxpayer invoices - no longer MP?
Ordinance of the Minister of Finance of March 28, 2011 on, inter alia, issuing invoices has also been included in the amendment. What should a small taxpayer pay attention to in 2013, who, as a rule, have a tax liability upon receipt of payment? The requirement to include the phrase "cash method" in the content of the invoice, as mentioned in par. 5 sec. 2 point 1. The new provision abolishes the existing necessity for small taxpayers' invoices to be called "VAT-MP invoice".
Importantly, including the phrase "cash method" on the invoice is an obligatory requirement, which means that it absolutely applies to all small taxpayers who have chosen this method of settling tax on goods and services. However, the decision whether to leave the entry "VAT-MP" in the header or to abandon it is at the discretion of the invoice issuer.
And how is the contractor of the Small Taxpayer accounted for?
Settlement of VAT according to the cash principle affects not only the small taxpayer issuing such an invoice, but also its contractor.
Purchase of goods or services from a small taxpayer using the cash method results in the contractor being entitled to deduct VAT only in the period in which he makes payment for this liability. At the same time, it is also possible to partially deduct the tax if only part of the receivable is settled in a given settlement period.
These regulations seem to be a natural consequence of things, however, in everyday life you can see a certain reluctance of entrepreneurs to receive invoices issued by vendors using the cash method. This is mainly due to the fact that they get the possibility to deduct the tax only when the liability is settled, and not, as in the case of a sale documented with a "regular invoice" - where the possibility of deduction arises at the moment of its receipt. The changes introduced by the 3rd deregulation act, requiring entrepreneurs to correct expenditure, make the differences slowly blur. However, for tax reasons, buyers still prefer transactions with taxpayers who settle accounts on general principles.
Since when does the new rules apply?
Amendments to tax regulations relating to small cash-based taxpayers have been in force since January 2013 and apply to both taxpayers who declare this method of accounting from the beginning of the current year, and those who were already registered as using the cash-based method before January 1, 2013. for VAT purposes. Therefore, there is no need to re-apply for the transition to the VAT accounting method upon receipt / payment by small taxpayers currently in 2012.
Although in the case of sales to active VAT payers in 2013, we had the cash method in accordance with its definition, in the case of sales to non-VAT taxpayers, the "pair" method still applies. In this matter, the only advantage is the extension of the period after which the seller, in the event of not receiving the payment for the goods delivered or the service provided, will be obliged to prove and pay to the tax office the VAT due on the sale, from 90 to 180 days. Maybe over the years we will see that the cash-based method for VAT purposes will actually depend only on the receipt of payment. At present, however, there is no other option but to adapt the measures to the current wording of the regulations. And for the next changes, we only need to wait patiently ...