Recognition of Corrective Invoices in JPK

Among the many challenges faced by taxpayers is the correct recognition of corrective invoices in JPK. Corrective invoices may increase the tax base resulting from the original invoice—these are referred to as in plus corrections—or decrease it—in minus corrections. How, then, should a corrective invoice be properly recognized in JPK? For the taxpayer, invoice corrections may relate to purchases or sales.

 

TABLE OF CONTENTS 

1. Sales Invoices
2. Purchase Invoices
3. Documentation Confirming Agreement of the Correction
4. Corrective Invoices in CIT
5. Transfer Pricing Adjustment – Rules for VAT and CIT Settlement

 

Sales Invoices

Corrective invoice increasing the tax base

Sales invoices are invoices that document a taxpayer’s transactions involving the sale of goods or services. They include output VAT.

In plus corrections

Corrective invoices increasing the tax base, in accordance with Article 29a(17), are recognized in the settlement for the reporting period in which the reason for increasing the tax base arose.

The reason for the invoice correction may result from an error that already existed at the time the original invoice was issued, e.g. an error in the VAT rate, an understated price, or an understated quantity of the invoiced goods. In such cases, the corrective invoice is recognized as of the date of recognition of the original invoice / at the moment when the tax obligation arose for the original invoice.

The reason for the correction may also arise after the sale has been completed; in such a case, the correction is recognized as of the date on which the event affecting the increase in the value of the sale occurred. An example of such an event is a situation where, after the end of a quarter, the seller receives, for example, a report indicating that actual sales were higher.

Corrective invoice reducing VAT

In minus corrections

Corrective invoices reducing VAT, in accordance with Article 29a(13–14), are recognized in the reporting period in which the corrective invoice was issued, provided that the seller has agreed with the buyer on the conditions for reducing the tax base, those conditions have been met, and the invoice issuer holds documentation confirming this.
If the seller does not have documents confirming that the conditions for the correction were agreed and fulfilled, the invoice is recognized in the settlement for the period in which such documentation was obtained.

Important!

• The above provisions apply exclusively to invoices containing VAT. In the case of VAT-exempt invoices, invoices with the NP rate, or the 0% rate, in minus corrections are recognized in the same way as in plus corrections—i.e. depending on the reason for the correction.
• A corrective sales invoice reducing VAT cannot be recognized earlier than the date it is issued, even if the correction conditions were agreed earlier.
• Article 29a(15) contains a list of transactions for which it is not required to collect documentation confirming the agreement and fulfillment of the correction conditions.

The requirement to hold documentation referred to in paragraph 13 does not apply in the case of:

• export of goods and intra-Community supply of goods;
• supply of goods and provision of services for which the place of taxation is outside the territory of the country;
• sales of: electricity, heat or cooling energy, piped gas, distribution services of electricity, heat or cooling energy, distribution services of piped gas, telecommunications services, and services listed in items 24–37, 50 and 51 of Appendix No. 3 to the Act;
• (repealed);
• issuance of a corrective invoice in the form of a structured invoice.

Important! The above provision does not list lease and rental services—therefore, for these services it is necessary to hold agreements.

 

Purchase Invoices

Purchase invoices are invoices that document a taxpayer’s transactions involving the purchase of goods or services. They include input VAT.

Corrective invoice increasing tax

In plus corrections

Corrective invoices increasing tax are treated as a “new” invoice and are recognized on the date of receipt or in one of the three subsequent reporting periods.

It is worth paying attention to whether a tax obligation has arisen for the invoice and whether 90 days have not elapsed since the payment due date indicated on the corrective invoice.

Corrective purchase invoice reducing input VAT

In minus corrections

As in the case of sales invoices, a corrective purchase invoice reducing input VAT is recognized in the period in which documentation confirming the agreement on the correction conditions was obtained, regardless of the date of receipt of the correction.

In the case of invoices relating to the purchase of electricity, heat or cooling energy, piped gas, distribution services of electricity, heat or cooling energy, distribution services of piped gas, telecommunications services, and services listed in items 24–37, 50 and 51 of Appendix No. 3 to the Act—corrections are recognized on the date of their receipt.

In accordance with Article 29a(15a)—in the case of import of services and supply of goods for which, pursuant to Article 17(1)(5), the taxpayer is the purchaser—where the tax base has been reduced, the correction of that base is made in the settlement for the reporting period in which the reason for reducing the tax base arose.

 

Documentation Confirming Agreement of the Correction

In most cases, confirmation of the agreement and fulfillment of the correction conditions is email correspondence between the seller and the buyer containing information about the event that occurred and confirming it. In such a case, the date of agreement may be assumed to be the date of the email. If the correspondence lasts a long time, the date of agreement is the date on which the parties reach an understanding.

An agreement may also take the form of a return of goods; in such a case, the date of agreement is the date on which the buyer returned the goods—this date is often indicated on the corrective invoice.

The date of refund of funds may also be considered the date of agreement on the correction conditions, provided that the transfer title clearly specifies which correction the transfer relates to.

There are also corrections resulting from contracts, e.g. a discount granted when the value of purchases in a given quarter is exceeded. In such a situation, the agreement on the correction conditions is the signed contract, while the documentation confirming fulfillment of the correction conditions may be a report confirming that the purchase exceeded the value specified in the contract.

 

Corrective Invoices in CIT

If a revenue correction is not caused by a clerical error or another obvious mistake, the correction is made by reducing or increasing the revenues achieved in the reporting period in which the corrective invoice was issued.

For example, if a seller issues a corrective invoice in connection with the return of goods by the buyer, they do not have to adjust revenues retrospectively, i.e. in the period in which revenue was recognized on the basis of the original invoice. They may reduce revenues on a current basis, i.e. in the reporting period in which the corrective invoice was issued.

In the above case, recognition of the corrective invoice for CIT purposes may differ from the moment of recognition of the corrective invoice for VAT purposes. For CIT, such a correction is recognized on the date of issuance of the corrective invoice, whereas for VAT it is recognized on the date of return of the goods, since the return itself constitutes agreement and fulfillment of the correction conditions.

If, however, the reason for issuing the corrective invoice was a clerical error made on the original invoice or another obvious mistake, the taxpayer should adjust revenues retrospectively, i.e. in the reporting period in which revenue was recognized on the basis of the original invoice.

In such a case, only where the correction increases VAT or concerns invoicing a service that did not take place (so-called “empty invoice”) will the correction for VAT purposes be recognized in the same way as for CIT, i.e. in the period in which the original invoice was recognized. In all other cases, recognition of the correction for VAT purposes entails the obligation to collect agreements, and at the same time the regulations exclude the possibility of recognizing a corrective invoice in a period preceding its issuance.

 

Transfer Pricing Adjustment – Rules for VAT and CIT Settlement

A transfer pricing adjustment (often referred to in group settlements as true-up, true-down, or TP adjustment) is a mechanism commonly used in capital groups.

Such an adjustment is possible if the following conditions are met:

• in controlled transactions carried out by the taxpayer during the tax year, conditions were established that would be agreed by unrelated entities;
• there has been a change in significant circumstances affecting the conditions established during the tax year, or the actually incurred costs or obtained revenues forming the basis for calculating the transfer price are known, and ensuring their compliance with conditions that would be agreed by unrelated entities requires a transfer pricing adjustment;
• at the time of making the adjustment, the taxpayer holds a statement from the related entity confirming that the entity has made a transfer pricing adjustment in the same amount as the taxpayer;
• there is a legal basis for the exchange of tax information with the country in which the related entity referred to in point 3 has its place of residence, registered office, or management board.

Important! As of 1 January 2022, the requirement to confirm the adjustment in the annual tax return has been removed from the above conditions.

The correction is recognized in the year to which it relates.

In some cases, if a true-up or true-down adjustment is documented with a VAT invoice (the issue of issuing an invoice in the case of a transfer pricing adjustment raises many questions; therefore, in each such case, an in-depth analysis is necessary and it is advisable to seek the opinion of a tax advisor).

In the case of an in plus correction, the correction should be settled in December of the year to which the correction relates.

In the case of an in minus correction, the correction is recognized on the date of agreement and fulfillment of the correction conditions, but not earlier than the date of issuance of the correction. In such a case, the agreement may take the form, for example, of a statement from the related entity, but also email correspondence between the entities.

 

Author: Agnieszka Piętak, Senior Tax Manager at MDDP Outsourcing