Recalculating the value of a leased asset due to currency fluctuations: how to adjust the VAT liability?

The “Officially on Taxes” Bulletin provides information on adjustments to the PFM liabilities in the event of currency fluctuations.

Due to the fact that the change (fluctuation) of the foreign exchange rate can lead to a change in the amount of compensation of the financial leasing object (if stipulated by the contract) both in the direction of increase and in the direction of decrease, the taxpayer – the lessor has a reason for adjustment of VAT tax liabilities and drawing up on the date of actual additional payment or refund of the adjustment calculation in accordance with item 192.1 of Art. 192 PKU.

The general limitation period is set by Articles 257 of the CCU and 102 of the CCU, lasting three years (1095 calendar days). However, the rules of the CCU do not provide exceptions for determining the limitation period for calculations of adjustments to tax invoices, made on leasing operations.

Therefore, the calculation of the adjustment to the tax invoice, from the date of which more than 1095 calendar days have elapsed, cannot be registered with the ERPN due to the expiry of the time limit set by Articles 257 of the CCU and 107 of the CCU.

Thus, if after 1095 calendar days from the date of occurrence of tax liabilities and the preparation of tax invoices when transferring the property to the financial leasing, its value decreases, the calculation of the adjustment to such tax invoices cannot be registered with the ERPN, and the grounds for reducing the tax liabilities the lessor is absent.

In this case, in case of reduction of compensation for the value of the property transferred to the finance lease, the lessee is obliged to determine VAT tax liabilities for the amount of such reduction, using the mechanism defined in clause 198.5 of Art. 198 PKU, and draw up and register with the ERPN the appropriate tax invoice.

In the event of an increase in the amount of compensation for the leased property, if 1095 calendar days have elapsed since the date of the tax invoice, the supplier is obliged to determine the tax liability for VAT and to file and register with the ERPN a tax invoice for the amount of such increase. Such a tax invoice registered with the ERPN shall be the basis for including the VAT amounts indicated therein in the lessee’s tax credit.