Junior Audit Manager at RSM Poland
Business transactions conducted by taxpayers require appropriate documentation.
That is a reason for keeping tax books. They constitute an evidence for proper accounting and they should, therefore, reflect the actual state.
(Un)reliability of the books
Only reliably and correctly kept books may be considered an evidence in the case of tax proceedings pending before tax authorities (according to art. 193 of the Tax Ordinance Act).
Concepts of unreliability and incorrectness were defined in the Fiscal Penal Code. In accordance with art. 53 par. 22, unreliable books are those which are conducted inconsistently with the actual state, which means they contain entries concerning events that did not take place, ignore events occurring or present figures other than those which occurred in reality. Art. 53 par. 23 of the Fiscal Penal Code defines books as incorrect when they violate the provisions of the law. In the case of account books, incorrect bookkeeping means that economic events are recorded against the provisions of the Accounting Act (AA), and in the case of taxpayers who keep the books – against the provisions of the Regulation on the Revenue and Expense Ledger. When, as a result, the general image of a company is unreliable and incorrect, there is a prerequisite to the imposition of criminal fiscal sanctions.
Responsibility for incorrectness
Penalties for unreliable bookkeeping are considered under the provisions of 3 legal acts. The main of them is the Fiscal Penal Code, applied by courts and police services; the Act on Accounting, however, in this case, liability is extremely rare. In addition, legal responsibility for keeping the books incorrectly can also result from the general provisions of the Criminal Code.
When during a tax audit or as a result of non-compliance with other obligations, which include, among others, failure to submit the financial statements, any incorrectness is detected, the provisions of the Fiscal Penal Code for criminal liability are applied, in connection with the incorrectness of bookkeeping. According to the Fiscal Penal Code, books include not only the accounts but also the revenue and expense ledger, records, registers and other registry documentation (primarily fiscal cash register records) which is required under the provisions of the Accounting Act.
In accordance with art. 4 par. 5 of the Accounting Act, the responsibility for bookkeeping rests with the manager of an undertaking, as he or she is the one responsible for the performance of the accounting obligations specified In the Act. Even when those obligations are assigned to an external company the manager of an undertaking still holds responsibility for the supervision. This responsibility can only be assumed by a third party after signing a written confirmation.
In the case of crimes sanctioned by the AA, the police and tax authorities are responsible for carrying out investigations. Hence, the penal provisions under the AA are used rarely. The abovementioned authorities often consider the case on the basis of criminal law (in the case of tax authorities it is the Fiscal Penal Code, the police applies the Penal Code). It should be noted that in the case of AA, unreliable bookkeeping is a prerequisite to hold a person liable, regardless of whether or not the resulting damage or violation of tax liability were material.
Penalties that may be imposed due to keeping unreliable tax books, according to art. 61 par. 1 of the Fiscal Penal Code, may be in a form of a fine amounting up to 240 daily rates. It is determined by the court under personal conditions and the offender’s amount of income. In the case of less serious breaches related to bookkeeping, the offender is liable to a fine as for a tax offense. The same penalty applies to those who incorrectly keep the books. Also, art. 303 of the Criminal Code specifies the penalties for inaccurate bookkeeping causing imprisonment for up to three years, unless the material damage is considerable, as in such cases there is a possibility of imprisonment of up to five years.
In contrast to the Accounting Act, according to the Criminal Code, in order to punish the offender there must be a case of material damage, as unreliable bookkeeping fails to constitute a reason enough for criminal liability. As it is specified in the Accounting Act, a taxpayer keeping the books unreliably may be liable to a fine or imprisonment of up to two years, or both.