Tax authorities require companies to verify their transactions with their counterparties, and preferably their counterparties. The tax representatives seem not to hear that taxpayers most often have no influence on who their supplier bought the goods from. Despite this, it is clear to the authorities that the taxpayer is deprived of the right to deduct VAT.
The jurisprudence of administrative courts is increasingly clear that when examining VAT transactions, the tax should consider each sale individually, since the VAT deduction mechanism does not provide for collective liability and a limitation of the right to deduct all trading participants due to any irregularities in one of the counterparties.
Where the tax authorities wish to deny the taxable person the right to deduct VAT, it should be pointed out that this right is the foundation of the VAT structure and its limitation may take place in specific cases where the authorities demonstrate that the taxable person knew or could have known with due care that he was involved in tax fraud.
LEVIES OF DECISIONS IN THIS SCOPE
1
„The case law of the TEU clearly indicates that there is no collective responsibility of the entities involved in the supply chain. This way of thinking would be extremely harmful to entities who have unconsciously been involved in this type of activity and could actually lead to the bankruptcy of many reliable companies" – NSA ruling dated 30 August 2017, reference no. I FSK 552/17
„Thus, the claim that it is widely known that there are many unfair operators and those who benefit from this in order to reduce the cost of their activities and that this should be reflected in particular care in carrying out such transactions is contrary to the assumptions of a tax on goods and services, in which the right to deduct is a structural element guaranteeing the neutrality of the tax for the trader and that each supply should be considered individually" — NSA judgment dated 19 September 2017, reference no. I FSK 133/16
„Tax authorities may not generally require a taxable person wishing to exercise the right to deduct VAT to examine whether the issuer of the invoice for the goods or services to be deducted is a taxable person, whether he has the goods in question and is able to supply them and whether he fulfils the obligation to submit a declaration and payment of VAT, or if he has such documents; in principle it is for the tax authorities to carry out the necessary checks on taxable persons in order to detect irregularities and infringements of VAT law and to punish taxable persons guilty of such irregularities or infringements" — judgment of the Court of Justice of the European Union dated 21 June 2012 on Mahageben and David C-80/11 and C-142/11.
The above shows that tax authorities cannot deprive taxable persons of the right to deduct VAT in the event of the discovery of transactions with a person who committed fraud (e.g. a disappearing taxpayer), unless they show that the purchaser acted in bad faith, i.e. he was consciously involved in the fraud.
In order to deprive the taxpayer of the right to deduct VAT from an invoice issued by a fraudulent counterparty, the tax authorities must demonstrate the wrong will of the taxpayer, and if they do not do so - there are good chances of winning a dispute with the tax and of recovering the retained VAT refund or undermining a decision determining the tax to be paid.
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