It is not always possible to deduct VAT from the invoice
One of the privileges of active VAT payers is the deduction of input VAT based on an invoice. This right results from the principle of VAT neutrality in trade. However, in practice it may turn out to be impossible, because sometimes just having an invoice does not give a chance to deduct input VAT. The situations in which it is impossible to deduct VAT from the invoice are presented below.
VAT deduction and issuing more than one invoice documenting the same sale
For tax security reasons, the rules according to which one transaction cannot be documented by more than one invoice should be followed. If the issued document contains errors, the taxpayer is obliged to correct it by means of a correcting note or issuing a correcting invoice. The prohibition of deducting input VAT from more than one invoice relating to the same sale means that this also applies to situations where the issued invoices have different numbers but refer to the same economic event. These types of cases occur due to the failure of computer programs or as a result of an error of the person responsible for invoicing.
Invoices documenting transactions inconsistent with reality
Pursuant to Art. 88 sec. 3a point 4 reduction of output VAT and a tax difference refund or input tax refund cannot be made on the basis of invoices and customs documents, if:
- state activities that have not been performed - in the part concerning these activities,
- provide amounts that are not in accordance with reality - in the part concerning those items for which amounts are not consistent with reality,
- confirm the activities to which the provisions of art. 58 and 83 of the Civil Code (aimed at circumventing the law or having an apparent nature) - in the part relating to these activities.
In connection with the above, invoices documenting events that have not been performed are not subject to deduction of VAT. In a situation where the invoice contains several items and only one shows the actually made transaction, the taxpayer has the right to deduct the tax only in this part.
The prohibition of deducting input VAT also applies to an invoice in which amounts inconsistent with reality, i.e. a greater value of sales has been shown. However, in such a situation, the regulations allow the buyer to deduct VAT in the part that actually took place.
The taxpayer is not entitled to deduct VAT on activities that cause fraud, tax fraud, as well as those aimed at circumventing the law and are of an apparent nature.
Invoices not accepted by the seller and VAT deduction
As a rule, the obligation to issue an invoice rests with the seller, but there are situations in which the buyer draws up such a document. The basis for their issuance is an agreement concluded between the seller and the buyer. Buyers' invoices must be approved by the seller in the form of a signature. The deadline for presenting the invoice should be indicated in the contract and take into account the possibility of timely tax settlement. Lack of signature - acceptance of the invoice by the seller causes the buyer to lose the right to deduct VAT resulting from this document.
The purchase is not for a taxable sale
Only entrepreneurs registered as active VAT taxpayers who provide taxable activities are entitled to deduct VAT. Therefore, an entrepreneur who benefits from the objective exemption or conducts a mixed sale (both taxed and exempt) may deduct input tax only when the purchase concerns a taxable sale. If the purchase concerns both types of sale or it is not possible to clearly determine whether it is a taxed or exempt sale, the coefficient of the share of taxed sales in the total sale is used.
Deduction of VAT from an invoice documenting the exempt sale
It is the seller's responsibility to apply the correct VAT rate. If the seller, in a transaction involving a sale that is exempt from taxation, shows an incorrect tax rate on the invoice, the error will have negative consequences for the buyer of the good or service. The grounds for deduction of input VAT are not invoices documenting non-taxable or VAT-exempt transactions (e.g. some training services).
Invoice from a non-existent entity
Only active taxpayers of this tax are the entities authorized to document the sale with an invoice on which the VAT amount is shown. Invoices issued by non-existent entities do not give taxpayers the right to deduct input VAT.