Part of VAT recoverable after bankruptcy of lessee
The Supreme Administrative Court (NSA) ruled that the lessor may reduce the tax base if the lease agreement was terminated early due to the fault of the lessee.
The case concerned a leasing company, where the lessee stopped paying instalments and went bankrupt. Unfortunately the court declared bankruptcy including liquidation of assets. The leasing company terminated the agreement with the lessee due to its arrears in installment payments. It received back the leased machine, which it later sold. After the termination of the agreement, the company issued a correction invoice which was then delivered to the bankruptcy trustee. It reduced the tax base by more than 1.8 million euros. She also corrected her VAT return, in which she indicated the tax to be returned to her account. The tax base was the amount actually received from the lessee.
However, the Head of the Tax Office questioned these actions, claiming that the company could not reduce the tax base because it had no evidence that the leased item had been returned. Then the director of the Tax Chamber in Warsaw upheld the decision of the head of the tax office. The case went to court, and the leasing company won in both instances. WSA ruled that it had the right to issue the adjusted invoice. It also stated that since the lease agreement provided that in the event of its termination, the leased item may be returned immediately, it was returned.
This judgment was upheld by the NSA. In its view, since the lease agreement was terminated early, the tax base was also reduced. After all, the lessor did not receive the entire amount due. The NSA also had no doubts that the leased item was returned.