Bad debt relief in PIT (Article 26i of the PIT Act) is a reduction of the tax base by the value of unpaid debts or increasing this base by the value of paid liabilities. In these cases, it is about remuneration for the delivery of goods or the performance of a service in a commercial transaction.
From the explanations of the tax authorities
Does the Applicant have an obligation for 2021 to increase the tax base with personal income tax in the tax return submitted in a situation where the payment for the steel fiber purchased from a seller from Germany will take place after January 1, 2022 and will take place after 90 days, counting from the payment date specified by the seller and indicated on the invoice documenting the purchase of the above-mentioned materials?
Therefore, the bad debt relief is the possibility of a tax adjustment by the creditor in the event of non-payment, and at the same time the obligation of a similar adjustment on the part of the debtor. In the case of income tax, the bad debt relief means a reduction and, accordingly, an increase in the tax base by an invoice that has not been paid after 90 days from the date of expiry of the payment deadline specified in the invoice or in the contract. Creditors have the option of reducing the tax base by the value of debt that has not been settled or sold, classified as revenue due. Debtors, on the other hand, increase the tax base by the value of the unpaid liability recognized as tax deductible costs.
Article 26i paragraph 10 of the Personal Income Tax Act says that the relief for bad debts in the personal income tax is possible on the side of the creditor and obligatory on the side of the debtor, when:
- the debtor is not in the process of restructuring, bankruptcy or liquidation;
- it has not lasted 2 years from the end of the calendar year in which the invoice was issued;
- the transaction was concluded as part of the activities of the creditor and debtor, the income of which is subject to income tax in the territory of the Republic of Poland.
Bearing in mind the description of the facts presented in the enquiry and the cited legal provisions, it should be stated that since the transaction was concluded as part of the activities of the creditor, whose income is not subject to income tax in the territory of the Republic of Poland, you are not obliged to increase the tax base with income tax from natural persons in the submitted tax return for 2021 (Interpretation 0113-KDIPT2-1.4011.1262.2021.3.MM of 22/03/2022)
Marcin Sądej, Redaktion podatki.biz