Correction of the invoice with split payment mechanism – individual interpretation

one from significant interpretations of tax law concerned the question of the lack of indication of the corrective invoice documenting the return of goods not included in Annex 15 to the Act of 11 March 2004 on tax on goods and services (i.e.

Journal of Laws of 2020, item 106, as amended, hereinafter referred to as the VAT Act), by the words ‘sharing mechanism’ (hereinafter referred to as the MPP procedure). What position did the Director of National Tax Information (hereinafter: Director of KIS) take? About this in this article.

The reality was as follows. The applicant, referred to in the ruling of an individual company, is an active VAT taxable person. The offer includes, among others, goods located in Annex 15 to the VAT Act[1].

The company issued a VAT invoice documenting, inter alia, the sale of the above goods for the amount 66,537.61 PLN, and, therefore, the content of the invoice in question includes the words ‘Mechanism of split payment’. A correction invoice was later issued to the above documenting the return of pallets of value 300 PLN gross.

According to the facts presented, the applicant asked the question: "Did the taxpayer do the right thing without marking in the registration part of the JPK V[7] M invoices of correction documenting the return of pallets which are not included in the Annex by the MPP procedure?’ According to the company, this was the correct proceeding in a given factual situation since the adjustments were made to goods not included in Annex 15 VAT Act.

On the other hand, the Director of KIS disagreed with this approach and found the applicant’s position to be incorrect.

The Director of KIS pointed out first of all two provisions, i.e. Article 106e(1)(18a)) the VAT Act, according to which ‘The fact that the invoice is intended to contain:...

in the case of invoices in which the total amount of the claim exceeds the amount 15,000 PLN or its equivalent in foreign currency, covering the supply of the goods or services referred to in Annex 15 to the Act - the words "the mechanism of the split payment", the rules used to determine the tax base shall apply to the conversion into gold amounts expressed in foreign currency;"; and the provision Article 19 Act of 6 March 2018 Business law (i.e.

Journal of Laws of 2021, item 162, hereinafter referred to as the Business Law), according to which: ‘The making or acceptance of payments related to the economic activity shall be effected through the payment account of the trader whenever:

1. the party to the transaction resulting from the payment is another trader; and
2. the one-off value of the transaction, regardless of the number of payments resulting therefrom, exceeds 15,000 PLN or the equivalent of that amount, where foreign currency transactions are converted into gold at the average foreign exchange rate announced by the National Bank of Poland on the last working day preceding the day of the transaction.’

Further attention was also drawn to Article 106j(1)(2), according to which:

„1. Where, after the invoice has been issued:

• 1) the price reductions are granted in the form of the discount referred to in Article 29a(7)(1),
• 2) the price discounts and reductions referred to in Article 29a(10)(1),
• 3) a refund was made to the taxable person of the goods and packages,
• 4) all or part of the payment referred to in Article 106b(1)(4),
• 5) the price or error in the price, rate, amount of tax or any other item in the invoice has been increased
• - the taxable person shall issue a corrective invoice.

The correction invoice shall contain:

• 1) the words "corrigible character" or the word "corrigible character";
• 2) the serial number and the date of issue;

3) the data contained in the invoice to which the corrective invoice relates:

• (a) referred to in Article 106e(1)(1-6),
• (b) the name (type) of the goods or services covered by the correction;
• 4) the reason for the correction;
• 5) if the adjustment affects a change in the tax base or the amount of tax due - the amount of the correction of the tax base or the amount of the adjustment of the tax due broken down by amount for the individual rates of tax and exempt sales respectively;
• 6) in cases other than those indicated in point 5 - the correct content of the corrected items.’

In conclusion, the Director of KIS pointed out that the obligation to pay an invoice satisfying the condition of Article 19(2) Rights of traders documenting the supply of goods/services from Annex 15 The VAT Act to the taxpayer, in the split payment mechanism, does not depend on whether the invoice contains a particular indication.

If the obligation has not been fulfilled and such an invoice has not been properly marked, the purchaser shall be required to pay the amount of duty for the goods or services from Annex 15 VAT Act in the split payment mechanism.

This has been justified by the fact that the buyer cannot rely solely on information from the seller, but should independently analyse the goods/services he has acquired and what obligations it entails.

In addition, the obligation to settle receivables under the split payment mechanism applies only to the amount of receivables for the acquisition of goods/services listed in Annex 15 VAT Act.

In the further part of the personal interpretation, the Director of KIS stressed that: “In the light of the provisions on the tax on goods and services, invoices are documents confirming the actual economic transactions carried out by the taxable person.

The invoice has a particular evidentiary role in the correct VAT dimension, and it is therefore vital that all elements of the invoice are correctly identified. The invoice is a document confirming the existence of an economic event (...).

The issuing of an invoice should be understood as drawing up the abovementioned document and its transfer to another entity (the purchaser) and thus introducing the invoice to legal trade.

However, in practice, there are situations where after the invoice is issued there are economic events affecting the content of the original invoice or the invoice contains errors. In such a situation, the legislator points to the obligation to correct such invoice by issuing a corrective invoice.

It should be pointed out that the rules on the application of the split payment mechanism apply to all invoices issued by taxable persons and therefore also to amending invoices.’

In this way, the Director of KIS justified the obligation to enter into an invoice amending the endorsement ‘the mechanism of the split payment’. Since the original invoice contained the above mentioned endorsement, it should be assumed that where the supply of goods/services after correction still includes items from Annex 15 to the VAT Act and the amount of total receivable on the corrective invoice exceeds the amount from Article 19(2) Business rights, the relevant amending invoice continue to meet the criteria on the subject of delivery and the amount of invoice receivables.

Individual interpretation with a signature 0113-KDIPT1-3.4012.957.2020.1.MJ; of 26 February 2021

Written by Michał Zdanowski, tax consultant at Russell Bedford Poland. Graduate of the Faculty of Law and Administration of the University of Warsaw, Graduate of the Postgraduate Tax and Tax Law Studies of the University of Warsaw, Graduate of the Postgraduate Accounting and Finance Studies of the Warsaw School of Economics.

During his studies, he gained experience in law and tax law firms. Since September 2013 He is associated with Russell Bedford Poland. It specialises in documenting transactions between related parties.