Reliability and inadequacy of the KPiR
Entrepreneurs who tax their income in accordance with the general rules (i.e. according to the tax scale) or with a flat tax, are required to keep special records that will allow them to establish the basis for calculating the tax levy for the tax office. Depending on the chosen form of activity and the form of settlement, in such a case the company's accounting is kept on the basis of the accounting books or the tax ledger of revenues and expenses (KPiR). Regardless of which records are appropriate, they must be kept in accordance with the principles set out in tax regulations. The most important of them are the reliability and imperfection of the books kept.
Principles of keeping the KPiR
If the taxpayer is required to keep the company's accounting on the basis of the KPiR, the relevant legal act in which he should seek guidance in this matter is the Ordinance of the Minister of Finance of August 26, 2003 on keeping a tax book of revenues and expenses. You can find there, among others information on how to make entries in the records, what they should contain, how to book them and number them. Importantly, other rules apply to farmers and taxpayers who are not farmers within the meaning of par. 2 clause 2 of the above-mentioned regulation.
Principles of keeping the KPiR - reliability and faultlessness
In par. 11 of the Regulation on the KPiR, there is a provision that the records should be kept in a reliable and non-defective manner. What does this mean exactly? Well, the tax book of revenues and expenses is considered reliable if the entries made in it reflect the actual state of affairs. The regulations (par. 11 (4) of the regulation) specify many exceptions to this rule, which means that not every error is automatically associated with unreliable records.
Par. 11 sec. 4 of the Regulation on the KPiR
“A book is also considered reliable when:
1) the unwritten or incorrectly entered amounts of revenue do not exceed a total of 0.5% of the revenue shown in the book for a given tax year or revenue shown in the tax year until the date on which the head of the tax office or the tax inspection authority found these errors, or
2) the lack of appropriate entries is related to an accident or random event that prevented the taxpayer from keeping the book, or
3) errors resulted in an increase in the amount of the tax base, with the exception of errors consisting in failure to disclose or lowering the cost of purchasing basic materials, commercial goods and labor costs, or
4) the taxpayer completed the entries or corrected incorrect entries in the book before the commencement of the inspection by the head of the tax office or by the tax inspection authority, or
5) incorrect entries are the result of an obvious mistake, and the taxpayer has accounting evidence that meets the conditions referred to in § 12 section 3. "
The revenue and expense ledger, which:
- it contains an entry about an event that did not actually take place (e.g. based on the so-called blank invoice),
- it does not contain an entry about an event that actually occurred (e.g. non-disclosure of a part of the turnover),
- it includes amounts other than actual amounts (e.g. understated turnover).
According to the second condition - the defectiveness of the KPiR - it should be conducted on the basis of the provisions of the regulation and explanations to the book model. Records which contain formal errors, such as failure to keep the form in the form of the KPiR in the form, lack of numbering of individual cards, or lack of chronology are considered defective.
Principles of keeping the KPiR - what is the penalty for defectiveness and unreliability?
The main effect of the unreliability or defectiveness of the book of revenues and expenditures is the rejection by the tax authorities of its evidential value in tax proceedings. As far as failure to meet the condition of fairness is concerned, it is a qualified act pursuant to Art. 61 par. 1 of the Fiscal Penal Code as a fiscal offense punishable by a fine of up to 240 daily rates.
On the other hand, the defectiveness of the book qualifies as a fiscal offense, therefore failure to comply with this obligation is subject to a much lower penalty. It can take the form of a fine of between 1/10 and 20 of the minimum wage or a mandate of up to twice the wage.
Moreover, the rejection of the revenue and expense ledger may turn out to be very unfavorable for the taxpayer, because in such a situation the tax authority has the right to determine the taxpayer's tax base by estimating (based on the methods indicated in Article 23 of the Tax Code).