BAD LONG - SUBJECT OF ADJUSTMENT:

From January 01, 2020 regulations on "bad debts" will come into force for the purposes of CIT / PIT, based on the provisions applicable to VAT purposes.

IN CASE OF NOT REGULATED

  1. In the event of non-payment of claims under commercial transactions for a period of 90 days from the first day following the payment deadline specified in the invoice or contract:
    • the seller has the privilege reducing the tax base / increasing the tax loss by reducing tax revenues from unpaid receivables,1)
    • the buyer has an obligation increasing the tax base / reducing the tax loss by reducing tax costs (increasing tax revenues - for entities taxed in the form of a flat-rate income tax) from an unpaid liability.2)

 

The correction for "bad debts" is made in the tax return submitted for the tax year in which the overdue period is over 90 days and until the date of submission of the tax declaration this claim has not been settled or disposed of. In addition, the adjustment for "bad debts" is prepared at the stage of calculating income tax advances.

BAD DEBTS - CORRECTION VALUE

 ATTENTION!! It is worth noting that the value of the correction:

1)  for a seller:

  • will fully increase the tax loss incurred resulting from business activity or,
  • minor tax base (in case of generating income) only up to the amount of income earned. The resulting surplus of the correction can be settled by reducing the tax base in the next 3 tax years, counting from the end of the tax year for which the right to reduction arose.

2) in the case of the buyer:

  • will fully increase the tax base (in the case of generating income) or,
  • it will fully reduce the tax loss incurred resulting from your activities, which can lead to taxable income.

IN CASE OF REGULATION

  1. In the case of settlement or sale of receivables, for which an adjustment for "bad debts" has been previously made:
    • the seller is obliged to increase the tax base / reduce the tax loss by the value of the amounts previously deducted / added, respectively,3)
    • the buyer is entitled to reduce the tax base / increase the tax loss by the value of the amounts previously added / deducted, respectively.4)

The reversal of the entries in the adjustment from "bad debts" (reverse adjustment) is made in the tax return submitted for the tax year in which the debt was settled or sold, also at the stage of calculating income tax advances.

BAD DEBTS - RETURN CORRECTION

ATTENTION!! Feedback correction value:

3) in the case of a seller:

  • will fully increase the tax base (in the case of generating income) or,
  • it will fully reduce the tax loss incurred resulting from your activities, which can lead to taxable income.

4) in the case of the buyer:

  • will fully increase the tax loss incurred resulting from business activity or,
  • minor tax base (in case of generating income) only up to the amount of income earned. The resulting excess of the correction will be settled by reducing the tax base in the next 3 tax years from the end of the tax year for which the right to reduction arose.

ADJUSTMENT FROM BAD DEBTS - WHEN

  1. The "bad debt" adjustment is made when three conditions are jointly met:
    • a commercial transaction is concluded between entities whose income is taxable in the territory of the Republic of Poland,
    • the debtor, as at the last day of the month preceding the date of filing the tax return, is not in liquidation or in restructuring or bankruptcy proceedings,
    • the claim is not time-barred, i.e. no more than 2 years have passed from the date of issuing the invoice, counting from the end of the calendar year in which the invoice was issued.
  2. The "bad debts" adjustment will not apply to:
    • classifying the receivables as tax costs by the seller on the basis of other provisions of the PDOP Act, e.g. by making provisions or updating write-offs of receivables,
    • commercial transactions made between related entities.
  3. Taxpayers preparing an adjustment for "bad debts" will be required to show in the tax return the receivables or liabilities related to the adjustment.

DEADLINES - TRANSITIONAL PROVISIONS:

The "bad debt" adjustment will apply to commercial transactions with a payment deadline from January 01, 2020.

In the case of taxpayers for whom the tax year is different from the calendar year and begins before January 01, 2020, the above provisions will apply starting from the tax year starting after December 31, 2019, in relation to commercial transactions whose payment deadline ends from January 01, 2020.

COUNTERACTING EXCESSIVE DELAYS IN TRADE TRANSACTIONS:

From January 01, 2020, statutory interest for delays in commercial transactions is 11,5% per annum.

Moreover, new flat-rate fees for the costs of debt recovery, due from the date of acquiring the right to interest, were introduced:

  • 40 eur - for cash benefits not exceeding PLN 5.000,00,
  • EUR 70 - for cash benefits above PLN 5.000,00 and lower than PLN 50.000,00,
  • 100 eur - for cash benefits equal to or exceeding PLN 50.000,00.