Bad debt relief in 2020

How to benefit from relief for bad debts? How to benefit from relief for bad debts?

Creditors will now have the option to reduce their income or increase any loss by the value of outstanding claims, but this will not be obligatory for them. Debtors, on the other hand, will be obliged to increase the tax base or reduce the loss by the amount of any unpaid debts that were previously included in tax deductible expenses.
Of course, once the debtor settles the outstanding debt towards the creditor, it will be possible to make an adjustment in the accounts for the relevant period.

What conditions must be met in order to take advantage of bad debt relief?

The debt must meet all of the following conditions in order for the bad debt relief to apply.

● The transaction to which the debt relates must be made as part of an activity that is taxable in Poland.

● The buyer must not be in the course of bankruptcy or restructuring proceedings on the last day of the month preceding the date of the filing of the annual tax return.

● No more than two years must have passed since the invoice or contract date. The two year period should be counted from the end of the calendar year in which the debt arose.

Why was the relief for bad debts introduced?

Bad debt relief is one of many measures introduced to fight payment gridlocks. In this case, the main aim is
to allow preferential settlement by creditors. In addition, another consequence should be that debtors increase
their tax liabilities, so it appears that this should result in a decrease in the number of late payments.