The answer to taxpayers' problems relating to due diligence is to be developed by the Ministry of Finance together with the National Tax Administration in the document ‘Methods for assessing due diligence by purchasers of goods in domestic transactions’. This document draws up a set of guidance to help tax officials to assess the due diligence of traders in VAT.
The issue of VAT fraud is still of great concern to taxpayers involved. On the one hand, the tax administrations are implementing further tools to counter unfair practices of taxpayers who are trying to exploit VAT fraud and are increasingly effective.
On the other hand, have increased the burden on all taxpayers, including those fully legal, and give rise to reasonable concerns as to the possibility of denying the right to deduct VAT in an unconscious, unintended transaction with an unfair counterparty.
In practice, we often encounter situations where taxpayers want to exercise due diligence, examine the reliability of their counterparty as closely as possible, in order to avoid the risk of questioning the possibility of deducting VAT as a result of accidental fraudulent transactions, but do not fully know how to do so and how to set a limit on reliable verification.
Moreover, tax authorities often have a problem with this, so a document has been created to make it easier for them.
„The methodology’ is intended to enable entrepreneurs to familiarise themselves with the methods and methods used by officials during the evaluation and to increase the certainty of national turnover and transparency of KAS activities.
„The methodology for assessing the due diligence of purchasers of goods in domestic transactions" is to be applied to taxable persons who purchase goods in domestic trade who have not committed VAT fraud and who did not know that the transaction which resulted in the purchase of goods serves VAT fraud. This document aimed at tax officials aims at harmonising the procedures and hierarchy of assessment, as well as identifying the most important circumstances to be taken into account when assessing due diligence in VAT. Moreover, the ‘Methods’ is intended to enable entrepreneurs to learn about the methods and methods used by officials during the evaluation and to increase the certainty of national turnover and transparency of the activities of the KAS.
The presented "method" is the result of public consultation and, in fact, first a version of such recommendations drawn up jointly by representatives of MF, KAS and the social side represented by 12 entities.
According to the assumptions presented, the tax authorities are to assess each time whether the taxpayer has duly verified its counterparty and the circumstances of the transaction based on a number of specific actions identified in the methodology. The content of the document divided these actions into 3 categories (based on the transaction stage criterion at which they can be carried out):
- at the start of cooperation with the counterparty (among other things, formal verification of registration in CEIDG/KRS, taxpayer register, transaction verification – existence of economic risk, cash transactions, non-market price level, transaction by a taxable person operating on a daily basis in another industry, issues of proper representation, expected payment deadline, small share capital);
- at the stage of continuing cooperation with the counterparty (such as further regular verification of the registration of the taxable person, shortening payment deadlines, insecurity of trade, failure to meet the quality requirements of the goods supplied);
- where the split payment mechanism is used.
The right to deduct VAT should be contested by the KAS only if the taxpayer has ignored those circumstances which, according to the authors of the methodology, are objective and verifiable.
The presented "method" is the result of public consultation and, in fact, first a version of such recommendations drawn up jointly by representatives of MF, KAS and the social side represented by 12 entities. The authors reserve that at this stage it is too early to present a document addressed directly to taxpayers, while this original version of the "method" will certainly be updated and adapted to the business practice.
Photo. The meeting with representatives of entrepreneurs who participated in the tax consultation on the grounds of due diligence in VAT took place (from the left) Deputy Minister of Finance, Head of the National Tax Administration (KAS) Marian Banas, Minister of Finance Professor Teresa Czerwińska and Deputy Minister of Finance Paweł Gruza. Source: MF
Author:
Leszek Dutkiewicz
Partner at Russell Bedford. From 2011 related to Russell Bedford Poland.
In years 2008 – 2011 worked for leading consulting companies (Ernst&Young, KPMG, BDO) providing tax advisory services. He specializes in tax and economic law, primarily in international tax law, tax proceedings, VAT and transaction prices.
Author of a publication on tax, civil and international law issues. Lecturer in tax law training.
He has legal education, in 2008 graduated from the Faculty of Law and Administration of the Jagiellonian University.