Poland: Expanded scope of VAT bad-debt relief (CJEU judgment)

Poland: Expanded scope of VAT bad-debt relief

The Court of Justice of the European Union (CJEU) issued a judgment that considered the compatibility of the Polish law on the value added tax (VAT) bad-debt relief with EU law.


The CJEU judgment holds that provisions of the Polish legislation are incompatible with measures under the EU VAT Directive—specifically those provisions that make the reduction of the VAT-able amount subject to the condition that, on the day of the delivery of the goods or of the provision of the services and on the day preceding the day when the adjusted tax return seeking the reduction is filed—the debtor is still registered as a taxable person for the purposes of VAT and is not subject to insolvency or winding-up proceedings and that on the day preceding the one when the adjusted tax return is filed, the creditor is itself still registered as a taxable person for VAT purposes.

The case is: E. Sp. z o.o. Sp. k. v. Polish Supreme Administrative Court (Case C-335/19, 15 October 2020)

KPMG observation

The CJEU judgment may provide an opportunity to recover VAT on outstanding debts—in particular in situations when debtors are subject to insolvency or liquidation proceedings.

Furthermore, the CJEU judgment may be regarded as a chance to apply bad-debt relief in situations when the Polish provisions make it dependent on the debtor's status (this applies to non-taxable individuals such as natural persons not conducting economic activity).

Note that until the end of 2020, it is possible to submit refund claims for overpayments reaching back to December 2014. Therefore, taxpayers may need to consider appropriate action as soon as possible.

Read an October 2020 report [PDF 2237 KB] prepared by the KPMG member firm in Poland

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