The Provincial Administrative Court in Gliwice ruled that the presentation of the invoice was not a material condition for deducting the cost from revenue. The most important thing is whether the costs incurred in order to obtain income actually existed. Thus, the court found that, in the absence of an invoice or its unreliableness, tax authorities are not exempt from the obligation to establish the material truth of the transaction.
According to the Provincial Administrative Court in Gliwice, attention should be paid to the fact that in the area of personal income tax (PIT) where one from the contractors there was an irregularity, it does not automatically translate to the other trading participant.
Based on its opinion only on an unreliable invoice, the tax authorities could not therefore conclude that this transaction had not taken place at all.
WSA in Gliwice noted that the legislator under Article 22(1) Act dated 26 July 1991 on personal income tax (Journal of Laws of 1991, item 350) clearly indicates that the cost of obtaining income may be referred to only if the expenditure has been incurred in order to obtain income or to preserve or safeguard the source of income.
Therefore, in assessing whether the expenditure was at the expense of all other facts other than the actual expenditure incurred are no longer relevant.
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However, it should be remembered that in the case of VAT, the invoice has a completely different role. The provisions of this tax indicate that the invoice is one of two constitutional conditions for deduction of input tax.
In order to deduct VAT, the taxable person must be entitled to dispose of the goods as the owner and must have the appropriate document (in fact or by customs document). However, it must not be forgotten that the identity between the content of the invoice and the actual conduct of the economic operation subject to taxation is necessary.
Failure to fulfil any of these conditions excludes the reduction of the tax due by the amount of input tax on goods and services.
In the opinion of the WSA in Gliwice, the situation is completely different for the PIT, where the invoice has only documentary and evidence value. Therefore, billing is not a material condition for deducting the cost from revenue.
The most important is the actual cost incurred in order to obtain income, and the lack of an invoice or its reliability does not prove that the transaction has not taken place. Therefore, tax authorities are not exempt from the procedural obligation to seek the material truth of the verified transaction if irregularities are detected.
However, it should be remembered that such activity from tax authorities is only expected to be objective. Therefore, the tax authority should not be required to obtain evidence which is only known to the taxpayer.
However, there was no doubt in the case in which the Gliwice court ruled that the goods existed. There was also no doubt that he was entered into the accounting records, nor that the goods were finally sold.
This is why the Court’s assessment includes circumstances that should inspire tax authorities to seek out the truth and verify the amount of expenditure incurred by taxpayers to obtain revenue.
The tax authorities' resignation from this activity led to a situation where the revenue due was not reduced by the duly established cost of obtaining it. For this reason, a tax on an incorrectly established tax base was paid.
The CSA in Gliwice, repealing the contested decision, confirmed that, in the context of PIT, the invoice only serves as documentary evidence and is not necessary to deduct the cost from revenue. It is important to actually bear the cost in order to obtain income. The absence of an invoice or its unreliableness does not exempt tax authorities from the need to correctly determine the tax on PIT.
Judgment of the WSA in Gliwice dated 12 December 2019 o reference no. I SA/Gl 1062/19
Author: Paweł Boś
Junior Tax Consultant, related to Russell Bedford Poland 2018. Author of numerous articles on legal and tax matters, published in the industry press. Law student at Leon Kozminski Academy in Warsaw.