Robert Nogacki, Founder ond Owner of Skrabiec Law Firm
As far as the pace of VAT refund is concerned, Poland ranks at the very end of the list of countries surveyed by OECD. The standard deadline by which a tax office should refund VAT payments amounts in our country to 60 days. Whereas in France or Hungary the same period is not longer than a month. In reality, the statutory deadline is often extended, as a result of which an entrepreneur may have his VAT refunded even after a few years, in extreme cases.
As an EU member state Poland is obliged to follow European law. Domestic provisions should be interpreted taking into consideration community regulations and judicial decisions of the Court of Justice. The way Polish tax offices act is, however, quite different from the conclusions drawn on the basis of the above mentioned guidelines concerning VAT refund.
The Court of Justice is of the opinion that the taxpayer cannot be denied the right to deduct the once calculated amount of tax arising from the invoices issued by a supplier for the one and only reason that the supplier has happened to infringe VAT regulations. Moreover, the taxpayer should not be expected to undertake any actions aimed at checking whether his supplier does happen to commit infringements, as this does not fall within his scope of responsibilities.
The right to make deductions may only be waived when the transaction was, in fact, an act of fraud and the buyer has been substantiated to have known or that he should have known that the transaction was being made in order to commit fraud.
However, the practice of Polish tax offices assumes that the taxpayer was perfectly aware of the fact that his contractor infringes the VAT act. There exists therefore a sort of “bad faith” presumption towards the entrepreneur in this respect.
Administrative courts stigmatize unlawful actions of tax authorities. The very verification of the accuracy of tax returns has to be conducted according to procedures stipulated in domestic law (audit activities, tax control activities, tax or control procedure). There are numerous examples to prove that tax authorities do get carried away and tend to forget about the fundamental rule of the tax procedure which is the rule of law. An example of the infringement of this rule is to conduct, as part of audit activities, cross-controls of the contractors of the taxpayer who is applying for VAT refund..
The legislator allows for the possibility to demand that the taxpayer’s contractors produce relevant documents also in order to verify the legitimacy of VAT refund, but solely with reference to the procedure or tax control conducted at the taxpayer’s, but not outside of it. According to the Voivodship Administrative Court there are no legal grounds to require the taxpayer’s contractors to produce any documents in order to verify the legitimacy of a VAT return only as part of audit activities without initiating a tax procedure or control.
The fact of tax authorities frequently ignoring the decisions of the EU may result to a large extent from the circumstance that tax authorities prefer satisfying themselves from the estate of an honest entrepreneur to undertaking complicated actions in order to search for non-existent taxpayers who infringed VAT regulations. It does not, however, justify tax authorities which, infringing the community law, attempt to enforce the guidelines included in the budgetary act concerning the expected revenues. Verification activities conducted in this way are far too burdensome for entrepreneurs and too often conducted blindly, without justified premises. Thus, entrepreneurs should pick up the gauntlet and fight for their rights. One may be successful in difficult disputes with the fiscal apparatus, the proof of which can be the above quoted practices of the Supreme Administrative Court.
Skarbiec Law Firm – we have been advising entrepreneurs on effective VAT refund for ten years already.