Bad Debt Relief in VAT

Taxpayers who have not received a payment for services rendered or goods sold can apply a tax relief for bad debts in their VAT settlement. The tax relief can be applied based on Article 89 a sec. 1 of the VAT Act.

A debtor who has not made the whole or partial payment due for a domestic invoice is obliged to correct the input tax amount (calculated based on the unpaid amount) which the debtor deducted in connection with the transaction documented on the invoice (Art. 89b sec. 1 of the VAT Act).

In connection with the Regulation of the Minister of Finance, Development Funds and Regional Policy of June 29, 2021, amending the regulation on the detailed scope of data included in VAT tax returns and records (Journal of. Laws 2021, item (1179), starting from January 1, 2022, taxpayers who make adjustments pursuant to art. 89 a sec. 1 and 4 of the VAT Act will be required to include - in their JPK_VAT7 records - the due date or the date of payment for the invoice to which the relief for bad debts applied.

In Polish Localization for Business Central, the SAFT VAT file structure for (JPK_V7M(2) and JPK_V7K(2)) declarations has been adapted to incorporate the changes required and the following new elements have been added: "TerminPlatnosci” (Due Date) and "DataZaplaty" (Payment Date).

Polish Localization will be also extended with a feature that will enable you to prepare and deliver the corrections for bad debt relief. The tool will support the search of documents with delayed due dates. It will also enable you to post the input and output VAT calculated due to the correction that decreases the VAT amount as a result of the bad debt relief. Analogically, it will be possible to control payment for documents for which VAT amount corrections have already been posted and post the corrections that decrease the VAT amounts. Ledger entries that will be created for corrections for bad debt relief will include all the data required for SAFT registration and reporting in the JPK_V7M or JPK_V7K files. The posted corrections will be archived in a database.