Reimbursement of excess input tax to construction companies - deadlines

Service-Tax

As a result of the amendment to the act on tax on goods and services from January 1, 2017, construction services performed by some entities were covered by the so-called reverse charge. The buyer of the service charges VAT on such a transaction. Taxpayers (subcontractors) subject to a reverse charge do not charge VAT, but make purchases necessary to provide the service. This results in a surplus of input tax over output tax. When can construction companies claim excess input tax?

Right to deduct input tax

Pursuant to Art. 86 sec. 1 of the Act of March 11, 2004 on tax on goods and services (Journal of Laws of 2017, item 1221, as amended), hereinafter referred to as the VAT Act, to the extent that goods and services are used to perform taxable activities, the taxpayer referred to in art. 15, has the right to reduce the amount of tax payable by the amount of the input tax, subject to article 22. 114, art. 119 paragraph. 4, art. 120 paragraph 17 and 19 and article. 124.

Pursuant to art. 86 sec. 2 point 1 of the VAT Act - the amount of input tax is the sum of the tax amounts resulting from the invoices received by the taxpayer on account of:

  • purchase of goods and services,

  • make all or part of the payment before purchasing the goods or providing the service.

Return of excess input tax over due tax

Under Art. 87 sec. 1 of the VAT Act, where the amount of the input tax referred to in Art. 86 sec. 2, is in the tax period higher than the amount of tax due, the taxpayer has the right to reduce the amount of tax due for the next periods or to refund the difference to the bank account.

The rules for refunding the tax difference to the taxpayer's bank account are set out in Art. 87 sec. 2-6 of the VAT Act.

It follows from the above-mentioned provisions that the right to reduce the amount of output tax by the amount of input tax is granted when certain conditions are met, i.e. the deduction is made by a registered, active VAT taxpayer, and when the goods and services from which the tax was acquired has been accrued, are used to carry out taxable activities. The condition enabling the taxpayer to exercise the right to deduct input tax is the relationship between the purchases and the taxable activities performed.

Therefore, the above rule excludes the possibility of reducing the amount of tax due by the amount of input tax related to goods and services that are not used for taxable activities, i.e. in the case of their use for activities exempt from VAT and not subject to this tax.

It should be emphasized that the legislator created for the taxpayer the right to deduct input tax in whole or in part, provided that he meets both the positive conditions resulting from Art. 86 sec. 1 of the Act and the absence of negative premises referred to in Art. 88 of the Act. This provision specifies a list of exceptions that deprive the taxpayer of the right to reduce the amount of tax due by the amount of input tax.

Return of excess input tax over due tax - deadlines

Pursuant to Art. 87 sec. 2 of the Act, the reimbursement of the difference, subject to paragraph 6 and 6a, within 60 days from the date of submission of the settlement by the taxpayer to his bank account in a bank established in the territory of the country or to an account in the cooperative savings and credit union of which he is a member, indicated in the identification application. In the event that the taxpayer has not performed in the tax period activities taxed in the territory of the country and the activities listed in article 4. 86 sec. 8 point 1, the taxpayer is entitled, upon his justified request submitted together with the tax declaration, a refund of the amount of input tax deductible from the tax due in connection with business activity carried out in the territory of the country or outside this territory, within 180 days from the date of submission of the tax return, subject to art. 86 sec. 19. Upon the taxpayer's written request, the tax office shall make the refund referred to in the first sentence within 60 days, if the taxpayer submits a property security to the tax office.

Moreover, with Art. 87 sec. 6 of the VAT Act, it follows that from the settlement for January, the tax office is obliged to refund the tax difference within 25 days from the date of submission of the settlement, if the following conditions are jointly met:

  • the amounts of input tax shown in the tax declaration, excluding the amount of input tax or the tax difference, from previous accounting periods, result from:

  • invoices documenting the amounts of receivables that have been fully paid via the taxpayer's bank account at a bank established in the country or the taxpayer's account at a cooperative savings and credit union of which he is a member, indicated in the identification application referred to in separate regulations,
  • invoices other than those mentioned in point a) documenting receivables, if the total amount of these receivables does not exceed PLN 15,000,
  • customs documents, import declaration and customs decisions that have been paid by the taxpayer,
  • import of goods accounted for in accordance with art. 33A, intra-Community acquisition of goods, the provision of services for which the taxpayer is their recipient, or the supply of goods for which the customer is the taxpayer, if the tax return shows the amount of tax due on these transactions;
  • the amount of input tax or tax difference not settled in previous accounting periods and shown in the declaration does not exceed PLN 3,000;

  • the taxpayer submits documents confirming the payment of the tax to the tax office via the taxpayer's bank account or the taxpayer's account at a cooperative savings and credit union;

  • the taxpayer for 12 consecutive months directly preceding the period for which the taxpayer applies for a refund within 25 days:

  • was registered as an active VAT taxpayer,
  • submitted monthly or quarterly declarations for each accounting period.

Taxpayer conducting construction activity - deadlines for returning the excess of input tax over due tax

The payback deadlines for construction companies are the same as for other taxpayers. Are:

  • 60 days - basic term,

  • 25 days - accelerated deadline,

  • and 180 days.

However, the Ministry of Finance, seeing the industry's problems related to the long waiting time for a tax refund (freezing the company's current assets), made it possible to obtain a faster return of the excess input tax over the tax due for construction entrepreneurs. However, the above applies only to micro-entrepreneurs. The announcement reads "returns declared by micro-entrepreneurs providing construction services will be processed by the tax authorities in a shortened time, ie even up to 15 days, without waiting for the expiry of the 25 or 60-day return period resulting from the submitted VAT declaration". It will only be possible to shorten the deadline for the return of excess input tax if the correctness of the refund is verified within this period. A microenterprise that operates in the construction industry and wants to receive a refund within 15 days should meet the above conditions:

  • provide tax records in the form of a JPK_VAT file for the period from which the tax surplus is refunded,

  • send the VAT declaration electronically.

Taxpayers who send JPK_VAT files together with the VAT declaration will present themselves as entities operating in a transparent and transparent manner. Such activities will also reduce the time and resources of the taxpayer to the minimum necessary to provide the tax authority with the possibility of verifying the submitted settlement. By enabling faster verification, micro-entrepreneurs from the construction industry affect their financial liquidity by receiving a declared return earlier.

Finally, it should be remembered that from January 2018, all VAT taxpayers are obliged to send declarations electronically and send JPK_VAT files. Thus, each microentrepreneur in the construction industry meets the above conditions. Hopefully, the above guidelines will not lose their validity after January 1, 2018.