VAT refund in the event of liquidation of a civil law partnership

Service-Tax

A civil law partnership ending business activity does not always close the settlements in positive territory. When the amount of costs exceeded the value of revenues, VAT may be reimbursed in the last VAT declaration. Then you have to remember about additional obligations that must be met. Read our article and find out what a VAT refund looks like in the event of liquidation of a civil law partnership.

Liquidation of business by partners

When liquidating a civil law partnership, first of all, appropriate notifications should be made in the offices. Each of the partners should separately change the entry or deregister in CEIDG (depending on whether he intends to conduct a sole proprietorship or resigns from running it at all). Therefore, it is necessary to submit the CEIDG-1 form within 7 days from the occurrence of the change.

When liquidating a civil law partnership, you should additionally include:

  • delete it from the REGON register using the RG-OP form,

  • submit to the tax office an update of the NIP-2 form,

  • deregister the company from VAT using the VAT-Z form.

Liquidation inventory for VAT

One of the important obligations under Art. 14 sec. 5 of the VAT Act is to prepare a liquidation inventory for VAT purposes. It will affect the VAT refund in the event of liquidation of the civil law partnership.

The physical inventory should include all goods, on the purchase of which were entitled to VAT and on the date of liquidation, are in the state of the company and represent value in use. First of all, it is necessary to count the commercial goods and materials that the company did not manage to sell. Importantly, goods are also understood to include fixed assets and equipment.

The physical inventory should contain the following elements:

  • the name of the goods,

  • quantity,

  • the purchase price of the goods (or similar goods) or the cost of production in the absence of the purchase price - however, this price is updated by the current market value, if it has changed since the purchase,

  • the net value,

  • VAT rate,

  • the amount of VAT.

The inventory does not include goods or equipment for which the entrepreneur was not entitled to a VAT deduction. Importantly, taxpayers are required to attach information about the physical inventory made, the value determined on its basis and the amount of tax due, to the tax return submitted for the period including the date of dissolution of the company or cessation of taxable activities.

Attention!

If the liquidation inventory for VAT purposes is zero, it can be expected that the tax authority will check whether the VAT declarations from previous years have shown purchases of fixed assets. If they have not been sold or liquidated, they should be disclosed in the inventory according to their current market price.

VAT refund in the event of liquidation of a civil law partnership - declaration

Entrepreneurs should know how to complete the VAT-7 / VAT-7K declaration in order to receive a VAT refund in the event of liquidation of a civil law partnership.

Value of VAT from the physical inventory in the case of VAT-7 (version 17) is entered in field 36. If in field number 56 there is an amount of excess tax over the due tax (i.e. greater purchases from sales), it should be entered in field 57 as the amount to be returned to the bank account, as well as indicate the date of VAT refund.

You can choose from:

  • 180 days - if there was no sale in a given settlement period; it is necessary to submit a justification together with a commonly used VAT-ZZ application.

  • 60 days - this is the basic deadline for applying for a VAT refund,

  • 25 days - an accelerated period, applicable if all purchase invoices making up the amount of the deducted VAT have been paid; additionally, a VAT-ZT application must be submitted, along with the change in regulations in 2017, the availability of this date was significantly reduced.

Important!

Pursuant to the amendment to the VAT Act, which has been in force since 2017, the provisions on VAT refund within the accelerated period of 25 days have been tightened. The following conditions should be met:

  • the amounts of input tax shown in the tax declaration, excluding the amount of the transfer of the VAT surplus on purchases from the previous period, 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 paid by bank transfer, documenting receivables, if the total amount of these receivables does not exceed PLN 15,000,

    • customs documents, import declaration and decisions referred to in art. 33 paragraph 2 and 3 and article. 34 and 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 the excess of input tax over due tax, 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 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 the next 12 months directly preceding the period for which the taxpayer applies for a refund within 25 days:

    • was registered as an active VAT taxpayer,

    • submitted declarations for each accounting period.

Additional documents for the last VAT declaration of the civil partnership

If the civil partnership submits the last VAT return, which shows the excess tax to be refunded, it should be remembered that it will not be made to the company's bank account as usual. In this case, the return goes directly to the partners' accounts. The last declaration should be additionally attached with:

  • a copy of the partnership agreement and any annexes from which the shareholders' shares will result,

  • letters signed by each of the partners, indicating the bank account to which the part of the VAT to be refunded is to be sent.

Only on the basis of the complete set of documents provided, the tax can be refunded to the partners.

Summing up, when preparing the last VAT declaration of a liquidated civil partnership, one should remember to include the value of VAT from the liquidation physical inventory and to attach documents additionally required by the tax office. These are the articles of association and letters from partners indicating their own bank accounts.