VAT tax (part 9) - Right to deduct part AND
Input VAT - related to the purchase of goods, materials, services and other company acquisitions. Thanks to the right to deduct it, the entrepreneur can reduce the amount of fees that he is obliged to pay to the tax office every month (or quarterly). However, it is precisely the fact that it is a right, and not a taxpayer's obligation, that prompts us to get acquainted with this type of tax - in this matter, no one will remind the entrepreneur about the expiry date or the possibility of tax deduction from an unusual document. Therefore, it is worth learning more about this issue - and saving.
Input tax - what is it?
Input VAT is - as already mentioned - the amount added to the basic value of purchased goods, materials, services or other expenses. It results mainly from purchase invoices received from contractors, although there are also some additional documents on the basis of which this liability may be deducted.
Importantly, the amount of input tax is also increased by output tax related to the import of services or goods, as well as intra-Community transactions. As a rule, when conducting such transactions, the tax may be entered in the register of both VAT sales and purchases, thanks to which the transaction will be VAT neutral.
In practice, accounting for input tax consists in the fact that the taxpayer may reduce the amount of output tax that is required to be paid to the office. It is a convenient solution to avoid unnecessary cash flows. The taxpayer's right is also to obtain a surplus of input tax over due tax in the form of an impact on the account.
Who can exercise the right to deduct?
The first and basic condition that allows you to deduct VAT on purchases is the status of an active VAT payer. The possibility of recovering the tax amount is not available to ordinary consumers, i.e. natural persons who do not conduct business activity, or entrepreneurs who benefit from the exemption.
Secondly, the expenses from which the entrepreneur plans to deduct VAT must be inextricably linked with running a business. This condition results from Art. 86 sec. 1 of the VAT Act - in accordance with this provision, to the extent that the goods are used to perform taxable activities, the taxpayer has the right to reduce the amount of tax due by the amount of input tax.
Thirdly, VAT can be deducted only in situations that have not been included in Art. 88 of the VAT Act. According to this provision, VAT cannot be deducted when:
- accommodation and catering services are purchased, except for the purchase of ready meals intended for passengers by taxpayers providing passenger transport services,
- the invoices or correcting invoices were issued by a non-existent entity,
- the transaction documented with an invoice is not taxable or is tax-exempt,
- the invoice, corrective invoice or customs document document activities that have not been actually performed, provide amounts inconsistent with reality or confirm activities inconsistent with art. 58 and 83 of the Civil Code,
- invoices or corrective invoices issued by the buyer (in accordance with separate provisions on self-invoicing) have not been accepted by the seller,
- invoices were issued in which the tax amount was shown in relation to taxable activities, for which the tax amount is not shown on the invoice,
- in the case of intra-Community acquisition of goods, the contractor does not have or did not disclose an EU VAT number.
When to deduct VAT?
Settlement of VAT - that is, showing it on a monthly or quarterly declaration - is not indefinite. The general rule in this matter is the taxpayer's right to deduct VAT in the tax period in which the taxpayer received the invoice, and the next two.
Example. The monthly taxpayer receives an invoice from the customer in May. VAT can be settled in May, June or July. On the other hand, a quarterly taxpayer who receives an invoice in May (Q2) may still settle it in the third and fourth quarter, i.e. in practice - until the end of the tax year.
When the above deadlines expire, the taxpayer cannot settle VAT in the current period. Only the net amount of the purchase should be entered in his accounting records.
In addition to the general rule, it is also necessary to remember about two exceptions in the period of accounting for input VAT.The first concerns invoices for utilities - rent, water, electricity, telephone, Internet. VAT can be deducted from this type of expenses only in the month in which the payment deadline indicated on the invoice expires, or in two subsequent settlement periods.
The second exception applies to invoices received from a small cash-based taxpayer. In this case, the taxpayer will be able to settle the tax only in the period in which the amount due was paid. If the entrepreneur pays only part of the amount, he can similarly settle a proportional part of the tax. This action is related to the fact that a small taxpayer is required to pay the tax due to the office only in the period in which he receives the payment.