Ruling description

The Provincial Administrative Court in Gliwice in its rulings of July 15, 2015 (case file number I SA/GI 112/15, I SA/Gl 113/15) ruled that, if a company issues invoices to its contractors at the time it accepts their orders and, consequently, on the basis of provisions of a framework agreement and following arrangements made between the parties, the company increases or decreases the price for the sold goods, and hence issues correction invoices, the said invoices should refer to the original invoices making it impossible to settle them “on an ongoing basis”. The same principle should refer to invoices received by the company and then corrected by its contractors. In view of the above, the company should retroactively adjust both revenue and tax deductible costs.

Comment

Provisions of the Personal Income Tax Act and Corporate Income Tax Act do not specify when the taxpayer should adjust revenue or costs in connection with received or issued correction invoices. At present, the stance presented by the tax authorities is that a correction invoice issued as a result of a circumstance which occurred following a sale or purchase does not evidence a separate, independent economic event but refers only to the status which existed in the past, hence to the original invoice. Consequently, subsequent issuance of a correction invoice (or any other document) does not result in a change of the date when the revenue or cost arose but influences only the amount of the said revenue or cost. This means that the taxpayer is required to adjust revenue and tax deductible cost on the date when the said revenue and tax deductible cost arose. The Provincial Administrative Court in Gliwice also expressed this view in the commented ruling.

Nevertheless, starting from January 1, 2016 the above stance should be changed substantially. The Act of July 24, 2015 on Amendment of Certain Acts in Connection with Supporting Amicable Methods of Dispute Resolution introduces certain regulations regarding the time of adjusting revenue and tax deductible costs taking into account the reason for the said adjustment. The new provisions introduce a principle that, if an original invoice correctly evidenced a given economic event and a correction invoice was issued by the seller as a result of the subsequently occurring circumstances, e.g. reduction of price, granted discount, return of goods or guarantee/warranty, entrepreneurs would settle the correction invoice in a given settlement period (i.e. on the date when the correction invoice was issued or received). If, however, the original invoice contained errors, hence erroneously evidence the facts, the entrepreneur would have to be required to assign the correction to the date when the due revenue occurred (respectively, the date when the cost was incurred), as it follows from the original document. The provisions regarding corrections of tax deductible costs will apply accordingly to adjustments of depreciation write-offs.

The proposed changes should be perceived as favorable. In general they would allow the elimination of a number of difficulties encountered by entrepreneurs and connected with, for example, the need to correct tax returns from previous years and pay outstanding tax liabilities in this respect, including default interest (in the event of reduced tax deductible costs or increased revenue) or the need to pay interest on advance payments for income tax (in the event of reduced tax deductible costs or increased revenue in the same tax year).