From January 1, 2020 new rules of settling unpaid receivables in CIT (corporate income taxand) PIT (personal income tax)

The amendment provides for the possibility for the creditor to reduce the tax base by the value of the receivable included in the revenue due by the payment of a cash benefit within the meaning of the Act on counteracting excessive delays in commercial transactions, if the receivable is not settled or sold within 90 days from the date of expiry of the deadline for its payment specified in the agreement or on the invoice (account).

Where, after adjustment of the tax base, the debt would have been settled (sold), the creditor would have to increase the tax base and pay the tax on the period in which the debt was settled (sold).

For the debtor, the amendment provides for an obligation to add the value of the liability to the tax base classified as tax deductible costs. If the debt is settled, the debtor shall be entitled to a refundable adjustment in the settlement for the period in which the debt is settled.

Adjustments will be made only in respect of receivables and liabilities arising in connection with commercial transactions where, in connection with such transactions, at least one of the parties determines the revenue or tax deductible costs, regardless of the date on which they are recognised in such revenue or tax deductible costs.

Following the example of VAT solutions, it is proposed to introduce additional conditions entitling to the projected settlement, i.e. a commercial transaction is concluded within the framework of the creditor’s activity and the debtor’s activity, whose income (both in the case of the creditor’s activity and the debtor’s activity) is subject to income tax in Poland, no restructuring or liquidation proceedings against the debtor on the last day of the month preceding the date of filing the tax return, a specified period of issuing an invoice or concluding a contract documenting the claim.

Excluded possibility of applying the said provisions between related entities within the meaning of the provisions of the Personal Income Tax Act. These rules are intended to discourage businesses from being in arrears and, as the definition of „related party” implies, there are no such problems in relations between related parties.

With respect to receivables not covered by the proposed settlement system, it is reasonable to leave the existing solutions unchanged.

In addition, an obligation is introduced to show claims or liabilities which result in an increase or decrease of the tax base in the tax return.

The Act enters into force on January 1, 2020 and in accordance with the transitional provisions, the above solutions will apply to transactions whose payment term expires after December 31, 2019.