On 7th December 2020, the judgment of the Court of Justice of the European Union in the case
C-335/19 (E. sp. z o.o. sp. k.) concerning the so-called “Bad debt relief” in VAT has been published in the official journal of the European Union.
According to the judgment, in order to be eligible for the right of VAT reduction, it is sufficient to prove that the debt has not been settled or assigned in any form whatsoever within 90 days of the expiry of the period for payment indicated in the contract or on the invoice (by the end of 2018, this period was 150 days). According to the judgment, the following requirements imposed on taxpayers in order to recover VAT from unpaid (in whole or in part) receivables shall be considered as unlawful:
- on the day of delivery of goods or provision of services and on the day preceding that on which the adjusted tax return seeking that reduction is filed, the debtor is registered as a taxable person for the purposes of VAT and is not the subject of insolvency, winding-up or restructuring proceedings,
- on the day preceding the date of filing of the adjusted tax return, the creditor is itself still registered as a taxable person for the purposes of VAT.
Therefore, taxpayers are not obligated to meet the above-mentioned conditions in order to recover the VAT due on outstanding receivables, also for past periods.
In order to obtain a refund of the overpayment together with interest calculated to the date of its return, taxpayers should submit corrections to tax returns together with an application for the reimbursement of overpayment (in case of the periods for which the final decisions in which the amount of tax obligation was determined were issued – by the resuming of tax proceedings) by 7th January 2021 at the latest.
In the event of submitting an application for the reimbursement of overpayment after 7th January 2021 (the resuming of tax proceedings will not be possible/effective after this date), the interest shall be calculated for the period from the day the overpayment occurs to 7th January 2021.
As a consequence, it is reasonable for taxpayers to review their outstanding receivables for which the VAT amount has not been recovered for the last 5 years (the deadline for the adjustments of VAT settlements for the period from December 2014 to November 2015 expires at the end of 2020).
MDDP advisers offer their support in the preparation of applications and recovery of VAT amounts with regard to bad debt relief provisions.
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If you are interested in obtaining further information, or would like to discuss the impact of the above on your business activity please contact:
Tomasz Michalik Tomasz.Michalik@mddp.pl tel. + 48 22 322 68 88
Janina Fornalik Janina.Fornalik@mddp.pl tel. + 48 22 322 68 88
Paweł Goś Pawel.Gos@mddp.pl tel. + 48 22 322 68 88
or your MDDP adviser.