VAT adjustment for outstanding invoices where the limitation period has been exceeded – specific case

According to the tax provisions in force, the tax base in the case of invoices that have been issued but have not been collected may be adjusted upon the opening of bankruptcy proceedings or upon the implementation of a reorganization plan.

Therefore, if bankruptcy proceedings were opened before January 1, 2019 and are still ongoing, the adjustment of the tax base is allowed starting from January 1, 2019, within a maximum period of five years without taking into account the date on which the invoices were issued.

In the case of customers for which the bankruptcy proceedings were opened after January 1, 2019, the adjustment of the tax base is permitted as from the date of the resolution rendered by the bankruptcy judge, but for no more than five years, starting from January 1st of the year following that of the decision to initiate bankruptcy proceedings.

We draw attention to the fact that this adjustment is permitted even if the subsequent verification requirement is no longer applicable. Under the Tax Procedure Code, the subsequent verification requirement may only be canceled after the end of the limitation period applicable to the right to establish tax-based claims or following a tax audit. Therefore, such adjustment may be made both for periods for which the limitation period is exceeded and for periods subject to a tax audit. In practice, a company may adjust the VAT related to outstanding invoices issued to customers for which the bankruptcy proceedings have been opened or a reorganization plan is implemented even if the limitation period is exceeded, provided that the 5-year period from the reorganization plan confirmation date or, in the case of the beneficiary’s bankruptcy, from the date of the court decision or resolution ordering the initiation of bankruptcy proceedings, respectively, is not exceeded.

In such cases, the subsequent verification requirement becomes applicable again for the tax period in which the value added tax became eligible for the operation subject to adjustment.

In conclusion, in the case of invoices that are subject to adjustment and have exceeded the limitation period, a new time limit is calculated, within which the tax body is entitled to establish tax-based claims.