In the course of tax proceedings or tax checks, the tax authorities, in order to verify the authenticity of the transaction, carry out cross-checks (checking activities). Until recently, such control could only be carried out at the taxable person’s direct counterparty, i.e. the seller from whom the taxable person bought the goods or services or at the buyer to whom the taxable person sold the goods or services.
Currently, there is no such restriction and tax authorities have the possibility to carry out checking activities not only with the taxable person's direct counterparties, but also with all entities that have sold or purchased the goods or services.
This means that in cross-checking tax authorities, in tax proceedings or tax checks, can verify all transactions (whole sales chain).
It is also important that the goods or services, at each stage of the sale, are the same goods or services as those which have acquired or sold to the taxable person for whom the tax investigation or tax control is carried out.
However, certain conditions must be met in order for cross-checks to take place. First of all, the tax authority cannot carry out cross-checks with each taxable counterparty. Such control may only take place if the seller or the buyer is an entrepreneur (an economic operator).
Thus, cross-checking will not be possible if the taxable person’s counterparty is a natural person who does not have a business activity or an activity which does not, however, acquire goods or services for private purposes.
In particular, the verification activities cannot be carried out in relation to persons for whom the sale was recorded through the fiscal cash register. This means that the subject of cross-checks will, in principle, be the turnover which is documented by issuing a VAT invoice.
In carrying out such activities, the tax authority may require the participant in the trade in the product or service in question to submit documents relating to the transaction.
It follows that the Authority may request, in particular, the presentation of a contract on the basis of which the sale or purchase was made and the invoice documenting the transaction.
In practice, it is not uncommon for the tax authority, in the context of cross-checks, also to call, in addition to submitting documents, for clarification, even though the rules do not give it such an opportunity.
In such a situation, the failure to reply to the questions raised by the Authority should not have negative effects and, in particular, there should be no order of order.
The principle is that cross-checks may be carried out in the framework of ongoing tax proceedings or tax checks.
Cross-check and VAT reimbursement
Cross-checks may also be covered by a taxable person’s counterpart who has asked the tax office to refund VAT. This control may take place despite the absence of a tax investigation or tax review. In such a situation, cross-checks will take place in the framework of verification of the appropriateness of the tax refund carried out during the checking operations.
Author:
Rafał Dąbrowski
Senior Manager in Tax Advisory. Lawyer, tax advisor, restructuring advisor. At Russell Bedford in charge of the Department of Tax Advisory. From 2011 It provides advice to leading companies from various sectors of the economy. In particular, he specializes in consulting the steel, fuel, construction, transport, real estate and IT industries. Speaker of conferences and training on tax law. Author of numerous tax-related articles published in the industry press.