Recognized Complaint - Goods Return and Revenue Correction


Taxpayers often have doubts as to the settlement period in which they should record the issued revenue adjustment resulting from the recognition of the complaint and return of goods that relate to the previous year. As it results from the individual interpretation issued by the Director of the Tax Chamber in Łódź on January 14, 2014 (reference number IPTPB1 / 415-643 / 13-4 / DS), the taxpayer in such a situation should present the correcting invoice in the settlement period in which the tax obligation arose.

Return of goods - the moment of recognition of the correction

The application for an individual interpretation was submitted by a taxpayer who trades in new car parts. The activity is settled on the basis of the book of revenues and expenditures. In connection with complaints and returns of goods, it issues corrective invoices. In 2014, the taxpayer will have to make adjustments for sales in 2013. The correction invoice is followed by issuing a document confirming the receipt of the returned goods to the warehouse (correcting the costs by the value of the goods sold according to the purchase price).

The taxpayer applied to the tax authority for an individual interpretation on whether, pursuant to the Personal Income Tax Act (hereinafter: the PIT Act), the correction of previously reported income should be taken into account retrospectively, i.e. in the same reporting period as the original invoice, or according to the date of its issue.

He also refers to Art. 14 point 1 in connection with art. 9 point 2 of the PIT Act. He believes that revenues in a given tax year depend only on the events that occur in that tax year. Therefore, revenue adjustments should be recorded in the period in which they were issued. The situation where the correction is issued due to a previously committed error should be treated exceptionally - then it should be included in the period of original income.

The director of the Tax Chamber found the taxpayer's position incorrect.

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Complaints and return of goods and the correction of income

In explaining its position, the tax authority indicated Art. 9 sec. 1 of the PIT Act, in which the legislator determined that all types of income are subject to taxation with income tax, except for the income mentioned in art. 21, 52, 52a and 52c, as well as income, for which the tax ordinance provides for abandonment of tax collection.

Pursuant to Art. 10 sec. 1 point 3 of the PIT Act, the source of income is non-agricultural economic activity. However, pursuant to Art. 14 sec. 1 of the PIT Act, the income from this activity will be the amounts due, even if they were not actually received, after excluding the value of the returned goods, granted discounts and discounts. For taxpayers selling goods and services subject to VAT, the revenue from this activity is revenue less the VAT due.

The date on which the revenue referred to in Art. 14 (1) of the PIT Act, the date of delivery of the item, sale of property rights or performance of a service or partial performance of a service should be considered (art.14 section 1c, subject to section 1e, 1h and 1i of the PIT Act), no later than the day:

  • issuing an invoice or
  • payment of receivables.

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Due revenues are defined as all kinds of revenues that the taxpayer has the right to claim - i.e. resulting from a specific legal relationship. A receivable should be understood as an entitlement to claim a specific benefit and an obligation to pay it. For this reason, the emergence of due revenues is coupled with the emergence of receivables. Due to the fact that the term debt comes from civil law, due revenues are considered revenues that are due under civil law, i.e. those that can be legally enforced.

The cited provisions indicate that, as a rule, tax revenue for the purposes of personal income tax arises on the date of delivery of the sold items.

In a situation where the service is settled in settlement periods, the date of the revenue generation should be the last day of the settlement period specified in the contract or on the invoice issued, at least once a year (Article 14 (1e) of the PIT Act).

On the other hand, in the case of income received from business activities, to which the provisions of para. 1c, 1e and 1h, the date of income is determined on the date of receipt of payment (Article 14 (1i) of the PIT Act).

In the application for an individual tax ruling, the taxpayer indicated that in 2014 he would issue invoices correcting sales for recognized complaints and returns of goods made in 2013 and 2014.

At this point, the tax authority stated that the corrective invoice did not present a separate and independent economic event. It concerns a sale that took place in the past. The correction invoice is closely related to the original invoice. The PIT Act does not contain provisions specifying the rules for correcting revenues, and thus the moment of making the correction, i.e. whether the revenue decreases (increases) on the date of the correction or on the date of the revenue due.

Significant determination of the date of obtaining income

The court concluded that the tax revenue should include the revenue currently due to the taxpayer (due, undoubted and unconditional). An important issue is determining the date of obtaining income, because it is closely related to the determination of the moment when the tax obligation arises.

“The priority in shaping the date on which the due revenue arises is the day when the activity is performed, the item is handed over, the property right is sold, or the service is rendered partially. Subsequent issuance of a correcting invoice does not change the date on which this revenue arises. Thus, the correcting invoice has an impact on the receivable revenue specified in the basic invoice, as it relates to previously reported revenue and not any other revenue. "

Summing up, the revenue adjustment resulting from the acceptance of the complaint and the return of the goods should be referred to the previously reported revenue. Thus, corrective invoices issued in 2014, which show the appropriate revenue from the sale in 2013, should be included in the settlement period in which the tax obligation arose - i.e. in 2013.

The above position is presented in court and administrative judgments, i.e. in the judgments of the Supreme Administrative Court of May 16 and June 26, 2012.

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