In what situation is cancellation of a VAT invoice possible?
The fact that it is at all possible to cancel an issued VAT invoice does not mean that entrepreneurs can just declare the document null and void. In the economic practice in Poland to date, it has actually accepted only one set of circumstances that allows the cancellation of a VAT invoice. We are talking about a situation in which an invoice documents an action that has not been performed.
This means that only a VAT invoice that was issued before the service/delivery of goods can be canceled. Moreover, both copies of the invoice (the one for the seller and a copy for the contractor) must be in the hands of the issuer – if the document has already been delivered to the buyer, it cannot be canceled.
Important!
Mr. Peter runs an online store – a few hours ago he received an order from a customer and issued a VAT invoice based on it. After some time, the would-be customer canceled the order, explaining that he had found the goods he needed at a lower price at another seller. For obvious reasons, Mr. Peter would now like to cancel the issued VAT invoice – fortunately, under the circumstances, he can do so.
The above example shows one of the situations in which an entrepreneur can (and even should) cancel a VAT invoice. What exactly makes a document cancellable? Here’s the condition:
Important!
A VAT invoice can only be canceled if it has not gone into legal circulation – that is, the invoice has not been delivered to the customer. So if the seller has both copies of the document, it is permissible to cancel the invoice (and therefore the transaction). For example:
- When the sale did not take place – in the example given, there was no sale at all. The customer, it is true, placed an order, but did not pay for it. The seller has not shipped the goods, and the invoice he issued has not reached the contractor.
- When the buyer did not pick up the shipment and did not pay for the goods – if the customer ordered the goods on delivery, but decided not to pick them up, and the package along with the invoice went back to the seller, cancelling the invoice is the correct solution.
However, there is an exception to the rule in question.
Cancellation of the invoice is also possible if the shipment of goods is lost or damaged – in order to do so, it will be necessary to have a document confirming the situation. For example, it can be a certificate issued by the courier company responsible for the loss of the package. If the invoice did not reach the customer (for example, it was in a lost shipment), a copy belonging to the issuer is sufficient for cancellation – you do not then need to have both copies of the invoice.
Can an electronic invoice be canceled?
Unfortunately, the issuance of an electronic invoice is almost tantamount to putting it into tax circulation – an invoice sent by email will almost certainly be received, and even if the buyer testifies that he did not receive the message containing the attachment, it cannot be said with certainty that receipt did not occur.
Moreover, if an entrepreneur issues VAT invoices through software and sends them to a specific address (the recipient’s email address), it should be assumed that the recipient uses software that books electronic invoices automatically.
Where to look for relevant regulations?
Although – as we mentioned at the beginning of the article – there are no regulations that directly regulate the cancellation of VAT invoices, entrepreneurs can take advantage of the individual interpretation issued by the National Tax Information. It is on their basis that the company’s actions can be planned in the context of problematic tax situations.
Invoices that have not been marketed – interpretation
Taxpayers who need a ruling on the question of whether they can cancel invoices that have not been entered for tax purposes are reassured: there is a specific tax interpretation issued by the KIS in 2010, with the reference IPPP1-443-1238/09-2/BS.
This interpretation is a clear confirmation that it is possible to cancel invoices that have not been entered into tax circulation.
Moreover, the cited individual interpretation asks not one, but two questions. The first was the ability to cancel an invoice that was not sent to the customer at all.
Applicant’s question:
If the Contractor does not receive the original and copy of an invoice sent by the Company documenting an activity that was not actually performed, does the Company have the right to cancel such an invoice?
Applicant’s position:
The Company may cancel an invoice documenting an activity that was not actually performed, a copy of which and the original of which were not received by the Contractor, as this means that such an invoice was not put into legal circulation.
As expected, there are no grounds to prevent the cancellation of such invoices. Therefore, the applicant’s position was deemed correct by the tax authority.
The second question, however, concerned a situation in which an invoice was sent to the recipient, but the recipient, having found an irregularity, sent the document back to the issuer.
Applicant’s question:
If a Contractor sends back an original and a copy of an invoice not included in its tax records and documenting an activity that was not actually performed, does the Company have the right to cancel such an invoice?
Applicant’s position:
The Company may cancel an invoice that is not included in the Contractor’s tax records and that documents an activity that was not actually performed, when a copy and the original of such invoice have been returned to the Company by the Contractor. According to the Company, this means that if the Contracting Party did not accept the invoice, it also did not record it in its tax records, which also confirms that the issued invoice documented an activity that was not actually performed by the Company, and therefore is not a document confirming the actual facts. According to the Company, the returned invoice was not, therefore, put into legal circulation.
Here, too, the applicant’s position was found to be correct.
Electronic invoices – interpretation
The question about the possibility of cancelling electronic invoices, in turn, is answered by an interpretation dated 22.01.2019 (reference 0112-KDIL4.4012.629.2018.1.NK).
In the situation at hand, the vendor (via automatic invoicing software) issued invoices to a number of customers with incorrect amounts. The businessman, after noticing the mistake, informed the buyers about it, and then issued corrective invoices to some of them, containing the correct amounts.
However, some customers refused to accept the corrective invoices, so the seller reversed the original invoices and the corrective invoices, marked the documents with the notation “Cancelled,” and then issued new invoices containing the correct amounts. According to the rationale of the National Tax Information Office, this conduct of the entrepreneur was incorrect.
In fact, and according to the letter of the law, it is sufficient in such a situation to make adjustments to the invoice. When a taxpayer issues a corrective invoice, it should be accepted by buyers without further comment. Making a correction to a VAT invoice when a document is issued with an erroneous amount is the correct practice as defined by the regulations.
How to cancel a VAT invoice?
We already know when it is possible to cancel a VAT invoice, we know the conditions, examples and interpretations. But how to approach the cancellation itself? What do you need to know and how to go about the process?
Invoice cancellation should be carried out in three simple steps:
- Cross out both copies of the invoice so that it is clear that they will no longer serve as ordinary sales documents.
- Invoices must be annotated accordingly, such as: “Cancelled” and the date of cancellation.
- Cancelled invoices must bear the signature of the person authorized to issue sales documents.
Important!
Cancelled invoices should not be thrown in the garbage! Instead, they should be attached to the other invoices in order to maintain continuity of document numbering. However, it is worth remembering that canceled invoices do not need to be recorded.
