Selected issues of VAT anti-optimization

Abstract

The methods of dealing with VAT frauds presented by me do not exhaust the problem. The aforementioned principle of abuse of the law was also introduced to prevent abuse of VAT. VAT Law in Article 5 Sections (4) and (5) means performing activities subject to VAT as part of the transaction that, despite the formal conditions laid down in the law, which was intended to achieve tax advantages that would be contrary to the objective pursued by those provisions. In the event of a misuse of the law, the taxable transaction results only in the tax effect that would have occurred if the situation had arisen which would have existed in the absence of acts of abuse of law. The principle of VAT abuse is similar to the anti-tax avoidance clause in the tax law. It should be noted, however, that the rule of law on VAT is not applicable to the amount of the tax advantage reached (PLN 100,000), which is in effect under the provisions of the Tax Ordinance. Before applying the principle of abuse of law, the taxpayer will not be protected by the safeguards that are effective but only with respect to the clause governed by the tax law.

The article presents the most important changes introduced in 2017 to the VAT Act. The introduction of a reverse charge mechanism aims at shifting the economic burden of the tax to the buyer. It is the buyer that pays and deducts VAT, so the transaction with the VAT flow is clear to the tax authority. In the absence of restrictions on the buyer side to deduct input tax, this transaction should be neutral for the buyer. Of course, not all provisions are perfect. I negatively evaluate introducing the joint and several liability of the proxy for the VAT arrears of the client whom he helped to register. The proxy is unable to verify the reliability of his client and therefore should not suffer the consequences of client’s actions. Removing a taxpayer from the VAT register without informing him about it should also be negatively evaluated. The consequences of the deletion of the taxpayer from the register will impact its counterparty in the form of no right to deduct input tax from the invoice issued by a non-existing entity. In general, the direction of change is good, as the state budget is losing huge amounts of VAT fraud. The tax laws for their effectiveness should be more precise. The quality of the application of these rules will depend on the judgment of a tax official who has acquired a vast array of possibilities in prosecuting tax fraudsters. The hope is that the tax authorities will focus on prosecuting real criminals and will allow honest taxpayers to keep their businesses running smoothly.