Poland: In A Situation Where All The Data Of The Seller Or Purchaser Of A Specific Good (Or Service) Is Wrongly Stated In A Given Invoice, It Is Not Admissible For The Purchaser To Correct The Data With A Correcting Note

Description

In its ruling of 4 February 2016 (case no. I SA/Po 1270/15), the Provincial Administrative Court in Poznan (hereinafter the "WSA") held that it is inadmissible for the issuance of a correcting note to actually result in the change of the entity being a party to a sale contract. Consequently, in a situation where all the data of the seller or purchaser of a specific good (or service) is wrongly stated in a given invoice, the entity issuing the invoice is required to issue a correction invoice.

A company moved for a tax ruling to be provided in a matter regarding the tax on goods and services. In its motion, the company stated that it as an acquiring company which, in connection with a demerger of another capital company, would receive an organized portion of an enterprise spin off from the company being a subject to the demerger. In connection with the planned acquisition, the Company asked whether in relation to the invoices, correction invoices, duplicates of invoices and correcting notes received by the Company, which indicated the demerged company as the purchaser, the Company was entitled to change the purchaser data in such a way that it reflected the fact that the acquiring company was a party to the transaction, by way of issuing a correcting note.

According to the Company, Art. 106j and 106k of the Tax on Goods and Services Act (hereinafter the "VAT Act") stipulates the possibility to have any errors contained in an invoice, which pertain to either purchasers or sellers, eliminated also by the purchaser with the use of a correcting note. The Company held that the errors that may be subject to correction may also include the errors that result in an erroneous indication of a natural person or legal person that was not a party to a sales contract since Art. 106k (1) of the VAT Act stipulating that a purchaser may issue a correcting note does not impose any limitations in that regard.

The Company received a negative tax ruling and challenged it before the WSA. When considering the case, the WSA did not share the Company's position and dismissed the Company's appeal by holding that a correcting note was a specific type of document issued by the purchaser (instead of the seller) and the use thereof cannot be fully unlimited. In the opinion of the WSA, there are certain limits as regards the scope of correcting notes and they should be applied in the case of petty errors, such as, among others, errors in the relevant name, address or tax ID number (NIP).

That said, invoices must indisputably indicate that the entity specified in the documents issued by the sellers is definitely the entity purchasing the relevant goods. However, if a totally different entity is the purchaser, then the change within that scope is a material one and such a change may only be made by the seller, as the source of the documents issued, thus eliminating the incorrect document.

Comment

Tax acts do not regulate in a direct manner the issue of handling a situation where a wrong entity was indicated in an invoice. However, it should be pointed that the WSA ruling falls within the prevailing views on the use of correcting notes that have been expressed by both administrative courts and tax authorities.

The view should be regarded to be a positive one. The purchaser data changed by way of issuing a correcting note would actually result in the change of the entity being the recipient of the service or good(s) since the identity of the purchaser would not be preserved. It was pointed out on numerous occasions by administrative courts that it would result in the creation of a document being an alternative to the invoice since one entity would be recorded as the purchaser of good(s) in the original invoice and a completely different one would be indicated in the contents of the correcting note, which would undermine the purpose for which the whole concept was devised. Potentially, it might also trigger some risk of a practical nature in a situation where both the entity named as the purchaser in the invoice and the entity indicated in the correcting note were attempting to deduct VAT under one and the same invoice.

Additionally, the adoption of a contrary assumption would entail the issue of a practical nature when trying to resolve which purchaser should issue the correcting note to change the purchaser. Should it be issued by the entity receiving the invoice or rather by the actual purchaser? Art. 106k of the VAT Act regulates the issuance of a correcting note by way of authorizing the purchaser who received an invoice containing errors to issue one. However, when interpreting the aforementioned provision literally, we would arrive at a doubtful conclusion that an entity not involved in a transaction would be supposed to participate in the accurate documentation of such a transaction.

The use of a correcting note to change the entire part of the purchaser's data may be potentially considered with respect to certain restructuring measures. In the case where a given entity acquires the enterprise of another entity whose data was disclosed in the original invoice, there would be no risk of a double VAT deduction since the acquiring entity as the sole entity being in existence upon the completion of the restructuring would be the only entity authorized to deduct the same.

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