Selection of the cash method of VAT settlement


Checkout method

The cash accounting method for VAT is characterized by a later tax liability date than in the case of general rules.

In the case of the cash method, the tax obligation arises on:

  • settlement of all or part of the receivables when selling to another active VAT payer,
  • payment of all or part of the receivables, but not later than within 180 days from the date of delivery of the goods / performance of the service when selling to a contractor who is not an active VAT taxpayer.

On the other hand, the right to deduct input VAT takes place after the payment of part or all of the invoice received by the small taxpayer.

This method allows the taxpayer to settle the tax on a quarterly basis, and also does not require the payment of VAT if his contractor fails to pay him for the delivered goods or services. The tax is paid after the actual receipt of the payment from the contractor. VAT charged on purchases of goods and services, however, the taxpayer may deduct only when he settles his liabilities himself.

Who can use the VAT method of cash accounting

Small taxpayers can take advantage of the option of VAT settlement in a special way, i.e. the cash method, in 2016. These are entrepreneurs whose sales value for the previous tax year, i.e. 2015, did not exceed EUR 1.2 million (PLN 5,092,440).

How to make a choice

Small taxpayers may choose to use the cash-based approach during the tax year. Willingness to switch to this method of VAT settlement must be reported in writing to the head of the relevant tax office by the end of the month preceding the period from which the taxpayer wants to settle the cash method. For example, if an entrepreneur wants to switch to the cash method of VAT settlement from August, he must notify the tax office by the end of July. The selected method must be applied for at least one year after the decision to change is made.

To sum up, the cash method of VAT settlement is available for small taxpayers. It exempts the taxpayer from paying the sales tax for which the taxpayer has not received payment, or postpones the payment deadline by 180 days in the case of sales to entities that are not active VAT payers. At the same time, it should be remembered that it does not give the right to deduct input VAT when a small taxpayer fails to pay the liability.