BSJP Brockhuis Jurczak Prusak Sroka Nilsson Sp. k. | View firm profile
On 15 October 2020, the Court of Justice of the European Union (hereinafter: CJEU) give their verdict regarding a Polish company: E. sp. z o.o. sp.k. against the Polish Minister of Finance (case no. C-335/19), regarding the compliance of Polish provisions within the scope of bad debt relief in VAT with EU regulations.
Subject matter of the case
The case which was settled before the CJEU concerned whether the provisions of the Polish Act on Goods and Services Tax comply with the EU regulations. The said provisions of the Polish Act, in contrary to the provisions of Directive 2006/112/EC, make the reduction of the VAT conditional upon the day of the supply of goods or services, as well as on the day preceding the day of submission of the adjustment of the tax return to benefit from this reduction, the debtor was registered as a VAT taxpayer and was not subject to bankruptcy proceedings or liquidation proceedings, and the creditor was still registered as a VAT taxpayer on the day preceding the day of submission of the adjustment of the tax return.
Settlement by the CJEU
The CJEU acknowledged that Article 90 of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax does not allow the Member States to depend a reduction in the amount of the value added tax (VAT) in their national legislation from the condition that on the day of the supply of goods or services and on the day before the date of submission of the adjustment to the tax return in order to benefit from that reduction the debtor was registered as a VAT taxpayer and was not subject to bankruptcy proceedings or liquidation proceedings, and the creditor was still registered as a VAT taxpayer on the day preceding the day of submission of the adjustment to the tax return.
In other words, neither the right of the creditor to reduction of the tax base nor the obligation of the debtor to reduce the amount of deductible VAT does depend on keeping the debtor’s status as a taxpayer.
Meaning of the verdict of the CJEU
The commented verdict of the CJEU should mainly cause the changes in provisions of Article 89a and 89b of the Polish Act on Goods and Services Tax. However, until these amendments are adopted, the taxpayers whose claim has been established as being irrecoverable and whose counterparties have gone into bankruptcy or liquidation while referring to the direct effect of Directive 2006/112 and, in particular Article 90 thereof should be able to recover VAT as a bad debt relief.
This means that the taxpayers whose case:
a) ended with a final judgment of a court – have 3 months to lodge a complaint regarding reopening of proceedings;
b) ended with a final administrative decision – have 1 month to submit a motion regarding reopening of proceedings.
The above-mentioned time frames should be counted from 15 October 2020.
Summing up, it is worth to remember about the limited time frame, namely, the taxpayers who have not taken advantage of the bad debt relief because, for instance, their counterparty was in bankruptcy, will be able to refer to the CJEU verdict and make appropriate corrections made to their declarations together with application for overpayment, provided that the period of 2 years has not passed since the date of issuing the invoice documenting the receivable, counting from the end of the year in which the said invoice was issued.