Poland Proposes More Taxpayer Protection Against VAT Fraud

By Jan Stojaspal

Snapschot

Introduces official certification of business partners’ completeness of tax declarations
Would add verification of timeliness of tax payments made to state

Polish taxpayers will be able to request official certification of how their business partners meet tax obligations under a proposed amendment to the tax code, a move aimed at protecting taxpayers’ right to deduct input value-added tax in cases ultimately connected with VAT fraud.

But they shouldn't expect blanket protection due to high administrative costs likely to be associated with the proposed measures, local tax practitioners said.

The proposed amendment on Sept. 28 cleared the first reading in the lower house of the Polish parliament, and is being considered by the Public Finance Committee, a spokeswoman for the lower house, told Bloomberg BNA Oct. 9.

“My concern is that this could increase enormously administrative work” for companies, Aleksandra Kalinowska, partner, indirect tax, Andersen Tax in Poland, told Bloomberg BNA Oct. 6.

“I would advise my clients to introduce internal procedures” to certify “the suppliers but only if there are really doubts, and there are some mistakes already identified,” she said, adding that she would advise the check “if there is a new contract and the transaction is material.”

Under the proposed amendment, expected to be voted on by the Polish parliament this fall, taxpayers would be able to request official information on their business partners’ completeness of submitted tax declarations and related documents, as well as on timeliness of tax payments made to the state.

The requests would be allowed to be as specific as to aid the verification of whether a particular
invoice has been declared in a particular VAT return, according to the tax practitioners.

The amendment also would expand the range of evidentiary data that could be used during tax proceedings by including “tax information and other documents collected in the course of analytical activities of the National Tax Administration.”

But this would only help taxpayers in the sense that it would remove doubts as to whether such information could be used by the tax authorities during tax proceedings, Marcin Jaworski, a senior tax manager at PwC Poland, told Bloomberg BNA Oct. 6.

“Basically, the amendment specifies explicitly that the results of analytical works can also be used during tax proceedings, which of course the tax authorities could do before,” he said. “Now it's just said explicitly that anything that can be used can be also the results of our analytical works.”

It may take effect as soon as the beginning of next year, according to Jaworski.

Accuracy Questions

Official certification of whether and how businesses meet their tax obligations “could be something major” in the context of Polish tax authorities stepping up efforts to fight VAT fraud and honest taxpayers paying for it, as denials of the right to deduct input VAT multiply, Jaworski said.

“It could help because you would have some viable tax information about the fraudsters,” he said. “What fraudsters don't do is they don't file VAT returns, or they don't pay what they have filed.”

There is concern as to the degree to which the tax authorities can actually vouch for the accuracy of the tax returns filed, according to Jaworski.

“This is controversial because the regulation does not specify when or at what stage the authorities can issue such information,” he said. “So, basically, if there is an ongoing tax control, does it mean that the returns are incorrect? Or if the results of the tax control are disputed by the taxpayer, what does the certificate state then? What does the certificate say if you are at second or third instance” of dispute resolution “or if you are in court?”

Better than Current Scenario?

Maciej Gorski, a tax manager at RSM Poland, said there also are concerns as to how much protection the proposed amendment would actually confer.

His main concern is that the list of due-diligence criteria—currently used by the tax authorities to judge whether a taxpayer exercised sufficient due-diligence vis-a-vis his business partners—is much longer.

According to Gorski, there are as many as 20 different criteria, and the list is far from being restricted to whether business partners meet their tax obligations to the state.

“With respect to the list, I am a pessimist,” he told Bloomberg BNA. “The list is two pages long, you need to check almost everything on it. The amendment does not change a lot because you still need to check something like 16 other topics, like you need to check that a place of business actually exists, that operating capital is sufficient to finance ongoing operations or that the person approaching you is really acting on behalf of his company and not an impostor.”

To contact the reporter on this story: Jan Stojaspal at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

For More Information

The proposed amendment is available, in Polish, at https://orka.sejm.gov.pl/Druki8ka.nsf/0/04DDF8E02334705CC12581A2003F01E2/%24File/1836.pdf