Suspension of business means that you do not conduct your company in an active way. However, this does not mean that in the period of suspension you cannot generate revenues or incur expenses. Similarly, any sales of title from which you issue invoice will be subject to settlement.
During the period of suspension of business activities, you are not obliged to submit a VAT- 7 (monthly) or VAT- 7K (quarterly) declaration. However, you need to be aware of a number of principles:
- you must submit a declaration for the period (month or quarter) in which you conducted business activity. This means that if suspension was made during the month/quarter, you must submit a declaration VAT-7/VAT-7K for that period,
- if you carry out intra-Community acquisition of goods or you import services or you buy goods in relation to which you are a taxable person, you must submit a relevant declaration,
- during the period of suspension of activities you submit the VAT declaration also in the case of correction of the proportion of VAT (taxable persons who pay according to the proportion mechanism and are therefore obliged to correct the deducted input tax in declaration for the first settlement period of the following tax year),
- if during the suspension period you would like to benefit from the right to deduct tax (e.g. for incurring the cost of forward contracts, a phone subscription or rental of premises) you must submit a VAT- 7 or VAT- 7K declaration since the submission of the declaration makes it possible to obtain a right to deduct tax,
- if you need to correct an earlier declarations you do it in a period of suspension of an activity.
As a taxable person you have to record in the revenue and expense ledger revenues and costs incurred during suspension of activities. Law specifies what kind of revenues and costs arising during this period should be introduced in the revenue and expense ledger.
As a rule, during the period of suspension of the exercise of an economic activity, entrepreneurs may not generate current income from that activity. However they may generate revenues from certain specified sources e.g.:
- from the sale of own fixed assets (or equipment),
- from the bank interest,
- from the activities carried out prior to the suspension (e.g. counterparty pays for an operation carried out before the period of suspension).
Costs incurred during suspension
During the period of suspension of activities the entrepreneur also bears the costs. Some of them are subject to be allocated to tax deductible costs. The catalogue includes those costs that are intended to preserve or secure source of income or are related to the financial liabilities which occurred before the suspension of activities. These may for example be:
- rent for premises,
- charges for utilities (e.g. telephones, gas, water, electricity),
- real estate tax,
- fee for perpetual usufruct of land,
- charges for the Internet,
- fees for the protection of business premises,
- insurance premiums for business cars,
- contributions for asset insurance,
- leasing instalments for the period of suspension of activity and
- bank fees for business account
In the case of generating revenue during the period of suspension, the entrepreneur is not obliged to pay income tax advance for the period, this obligation is suspended. Suspended advances are paid for the first period following the resumption of economic activity, or in the annual tax return.
Annual tax return during suspension of activity
During the period of suspension of activities you must submit an annual tax return (in the case of revenue and expense ledger - no later than 30 April of the following year), even if in a given year your activity has not generated any revenue or costs. At the same time, possible tax must be paid.
During the period of suspension of activities the entrepreneur is obliged to draw up a physical inventory on the dates indicated in paragraph 27(1) of the Regulation of the Minister of Finance on the conduct of revenue and expense ledger, closing the tax ledger and determining income (loss).Share Print