JP Weber

Disposal of receivables does not remove the right to bad debt relief for VAT

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Disposal of receivables does not remove the right to bad debt relief for VAT

JP Weber's team of advisers won in a dispute with the tax authorities in proceedings before the WSA. The court upheld the taxpayer's position, confirming that the literal wording of the VAT Act cannot contradict the principle of tax neutrality and proportionality.

This is good news for many taxpayers who have had to pay VAT on the full value of an unpaid sales invoice relating to a supply of goods or services following the disposal of outstanding debt. This disproportionate charge has repeatedly made the sale of a difficult to enforce receivable unprofitable for the taxpayer.

In its oral reasoning, the WSA emphasised the essence of the principles governing VAT harmonisation: proportionality and neutrality, pointing out that a taxpayer cannot be charged a disproportionate burden when selling an outstanding debt. The principles of proportionality and neutrality remain universal, regardless of the literal wording of the legislation.

 "The WSA's ruling is an important confirmation of an earlier WSA ruling in a similar case, unifying the line of jurisprudence and strengthening the voice of taxpayers forced to sell unpaid receivables to improve liquidity. This is an important judgment, giving hope for an improvement in the situation of many entrepreneurs." - explains Marcin Dudarski Ph.D., Managing Partner at JP Weber.

 "At a time when entrepreneurs are struggling with inflation and strong cost pressures, the disproportionate burden of VAT on the sale of receivables made the move unprofitable. Now, we can secure transactions from the tax side, while at the same time increasing clients' ongoing liquidity." - adds Zbigniew Duś, Partner, Tax Advisor at JP Weber.

JP Weber

Marcin Dudarski, Phd.

Marcin Dudarski, Phd.

Managing Partner,
Attorney at Law

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