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PRODOCEO LLC SKA

ul. Pory 78
02-757 Warszawa
Polska

VAT id: 521-36-36-523
Statistical number: 146297099

How do the changes in VAT and CIT law impact the Company's tax obligations in 2013 ?

Changes in CIT

The Company cannot include in taxable costs purchase invoices, if those invoices has not been paid for within 30 day since the payment date. This rule applies to a situation in which the parties agreed terms for payment no longer that  60 days. For longer payment, the rule relates to unpaid invoices for 90 days since the issue date.

Business consequences

The Company tax base can be significantly changed by the fact, there is no cash outflows and payments. For example, the Company that would normally record tax loss, however due to the high amount of overdue trade liabilities, it will be obliged to pay the tax advance. It has to be remembered however, that when the liability is paid, the cost become taxable again.

Accounting consequences

Every time there is an obligation for CIT advances (monthly or quarterly), the accounting department will have to review all the purchase invoices for the year 2013 and classify them as follows:

Status of the purchase invoice Tax status
  • They are paid.
Taxable cost
  • They are not paid but they are not overdue 30 days yet.
Taxable cost
  • They are paid only in certain percentage e.g. 50%, the rest is overdue more than 30 days.
Only the paid part is taxable cost
  • They are not paid and they are overdue more than 30 days.
Non-taxable cost
  • They were previously excluded based on point above, and they are paid in the given period.
Taxable cost
  • Purchase invoice for fixed assets overdue more than 30 days.
The depreciation of that asset is   non-taxable cost
  • Purchase invoice for fixed assets paid after the overdue more than 30 days.
The depreciation of that asset can   again become a taxable cost
  • Purchase invoice for trade goods overdue more than 30 days, when the goods are sold.
The cost of sale is not taxable
  • Purchase invoice for trade goods paid after the overdue more than 30 days.
The cost of sales of that goods can   again become a taxable cost

 

Changes in VAT

The Company right to deduct the VAT on purchase invoice is limited to invoices paid and unpaid invoices not overdue more than 150 days. For all the invoices unpaid more than 150 days, the Company must correct the VAT declaration for the already claimed tax.

On the other side, the company has right to claim the paid VAT on sales invoices if the customer has not paid the sales invoice within 150 days.

Business consequences

Cash inflows on receivables

If the Company’s clients does not pay the invoices for more than 150 days, the Company can request the VAT returns from tax office on unpaid sales invoices. One the customer pays, the VAT must be paid as well.

Cash outflows on payables

In general, The Company has right to deduct from VAT payable, the VAT tax on purchase invoices. However, if the purchase invoice is 150 days overdue, the Company loses their right for deduction. Therefore, if the Company has unpaid invoices, e.g. purchase invoices for goods, it may happen the VAT payable will significantly increase.

The VAT tax should be corrected in the VAT declaration for the period, in which the 150-days collapsed. In a case, the tax control acknowledges, the tax payer did not correct the VAT on unpaid invoices, they will chargé a fine amounting to 30% of the VAT value not corrected

The new law is effective starting 1 January 2013 and relates to unpaid invoice with the due date 4th August 2012.

 For January 2013 monthly VAT

All purchase invoices if not paid until the end of January 2013 with the payment date scheduled from 4 August 2012 to 3 September 2012 will be subject to VAT correction

For 1st quarter 2013 VAT (31 March 2013)

All purchase invoices, if not paid until the end of March 2013 with the payment date scheduled from 4 August 2012  to 1 November 2012 will be subject to VAT correction

 

 Accounting consequences

Every time there is an obligation to calculate VAT tax (on monthly or on quarterly basis),  we would have to review all the VAT invoices and classify them as follows:

Status of the purchase invoice VAT Tax status
  • They are paid
VAT deductible
  • They are not paid but they are not overdue 150 days yet
VAT deductible
  • They are not paid and they are overdue 150 days yet

VAT non-deductible.

VAT correction as the tax payer lost the right to deduct VAT on that invoice

  • They are paid after the VAT correction

VAT deductible

VAT correction as the tax payer gains the right to deduct VAT on that invoice.

Status of the sales invoice VAT Tax status
  • They are issued
VAT payable to the tax office
  • They are not paid within 150 days   after the terms of payment
The VAT paid can be applied back.