VAT advice for businesses: transactions, deductions, due diligence, cross-border settlements and disputes.
An unusual transaction, an overseas counterparty or a question about VAT deduction calls for a closer look beyond the invoice. We review the tax treatment, documentation and due diligence, and help prepare a response and handle the dispute if the tax authority challenges the VAT treatment.
VAT advice for businesses
Cross-border transactions, supplies with installation and unusual invoicing arrangements raise questions about the place of taxation, the rate, when VAT must be accounted for and the right to deduct input tax. We help establish the VAT implications before an invoice is issued and, where an audit is already under way, prepare a position and supporting evidence.
When accounting for VAT stops being routine
Businesses most often approach us in one of these situations:
- an unfamiliar business partner proposes a high-value transaction with a short payment deadline
- a request for explanations or a notice of a VAT audit arrives
- goods travel from Poland to a customer in another country, but the sale involves an intermediary
- the accounting department refuses to deduct VAT on an invoice and the management board is unsure whether this is justified
- a property sale is planned and it is unclear whether the transaction is exempt
- the company is starting cross-border sales, electronic services or distance selling
- a service may qualify for a reduced rate and this needs to be documented
These situations carry different levels of urgency. A request from the tax authority requires a response by the specified deadline, whereas a question about the rate for a new service can be planned ahead. Both call for a decision that can be substantiated if the VAT treatment is challenged.
VAT due diligence: what the authority examines
The right to deduct input VAT arises under Article 86(1) of the Act of 11 March 2004 on Value Added Tax and applies to the extent that a purchase is used for taxable activities. The authority may challenge that right if it considers that the invoice records a transaction that did not take place. The relevant basis is then Article 88(3a)(4)(a) of that Act.
In such disputes, the evidence usually matters more than the provision itself. What counts is what the company checked before the transaction and whether it can demonstrate this today. The Ministry of Finance has described the expected checks in its Methodology for assessing due diligence by purchasers of goods in domestic transactions. The document is not a source of law, but authorities refer to it regularly and administrative courts take it into account when assessing good faith.
The method of payment creates a separate risk. For transactions meeting the statutory conditions, a transfer to an account outside the VAT taxpayer register under Article 96b of the VAT Act may make the purchaser jointly and severally liable for the supplier’s tax arrears under Article 117ba of the Tax Ordinance. In certain circumstances, this risk may be excluded, among other things, by an effective ZAW-NR notification or payment using the split payment mechanism.
Chain transactions and intra-Community supplies
Where a sale involves several entities but the goods physically travel from the first to the last, allocating transport to the correct supply is crucial. This determines which supply is the transport-linked supply and may qualify for a zero rate. The place of taxation of the remaining supplies is then established under the relevant VAT rules and the actual structure of the chain. An error at this stage usually does not become apparent immediately and emerges during an audit covering several years.
The conditions for zero-rating an intra-Community supply of goods work similarly. A company may genuinely supply a customer in another country and still encounter problems with the 0% rate if its evidence does not confirm that the goods were dispatched and delivered. Article 42 of the VAT Act identifies the basic documents, but the range of admissible evidence is not entirely closed: in certain circumstances, documentation may be supplemented with other evidence. Keeping transport documentation in order can therefore be more important than the transaction structure itself.
VAT advice at Tax Legal Partner
Our support covers:
- assessing the VAT implications of a specific transaction before it takes place, with alternative options
- due diligence procedures for purchasing and sales teams, including a checklist of verification steps
- accounting for chain transactions, intra-Community transactions and exports, including evidence supporting the zero rate
- analysing the right to deduct input VAT on mixed-use purchases and expenditure questioned by the accounting department
- VAT on real estate transactions, including opting to tax a supply of a building
- correcting VAT returns and JPK_V7 files and preparing the reasons for the correction
- applications for individual tax rulings and binding rate information (WIS)
- reviewing contracts for the applicable rate, the tax point and invoicing rules
- representation in verification activities, audits and tax proceedings concerning VAT
How we work together
We provide VAT advice in three steps, whether the matter concerns a single transaction or an entire purchasing procedure.
Discussing the transaction. We establish what is actually happening: who sells to whom, where the goods are, who arranges transport and what documentation exists. This stage usually takes one meeting, after which it becomes clear whether the matter is straightforward.
A written position. You receive an assessment with its legal basis and an explanation of where certainty ends and risk begins. If the position needs protection, we select the instrument appropriate to the issue: an individual tax ruling, binding rate information (WIS) or another statutory solution. Not every VAT issue can be resolved through the same procedure.
Implementation and ongoing support. We translate the conclusions into a procedure, document template or contractual clause so that the same situation does not return as a question next quarter. If an audit takes place, we act as your representatives.
Arrange a discussion about your VAT position
If you have a specific transaction or a letter from the tax authority, write to us and describe the facts. During the first discussion, we will identify the issues requiring analysis and define the scope of work.
Jarosław Włoch advises on VAT and handles tax disputes. Michał Piegdoń works on VAT matters involving the public sector, cultural institutions and municipal companies.
Frequently asked questions
No. The register maintained under Article 96b of the VAT Act confirms registration status and the bank account, but the assessment of good faith covers a broader range of checks described in the Ministry of Finance’s Methodology. A printout from the register alone may be insufficient in a dispute.
We check whether the obstacle is formal or relates to the transaction itself. In the first case, correcting the document is usually enough. In the second, we need to assess whether the right to deduct arose at all and decide whether to protect the position through an application for a tax ruling.
No. The supply to which transport is allocated may qualify for a zero rate if the relevant conditions are met. The place of taxation of the remaining supplies is determined separately under the rules applicable to the actual structure of the chain.
We handle both. We represent clients in verification activities, tax audits and customs and tax audits, as well as appeals and proceedings before administrative courts.
It depends on the number of purchasing processes and systems used by the business. After the first discussion, we specify the scope and timeframe rather than estimating them at the enquiry stage.
Have a question that is not covered here? Write to us. We will agree on the scope of an initial assessment.
Partner | Attorney-at-law | Licensed tax advisor
tel: +48 509 485 709