TRENDS IN TAX AUDITS AGAINST FOREIGN ENTREPRENEURS
Tax audit, customs and fiscal control as well as preliminary checks are situations in which the support of a professional attorney is necessary to ensure effective protection of the taxpayer’s interests and representation before the inspection authorities, as well as to minimize the risk of sanctions. A tax advisor, thanks to his knowledge and experience, can significantly facilitate preparation for an audit and passage through the entire process, saving the entrepreneur time and resources.
In recent years, Poland has seen a marked intensification authority tax audit and preliminary checks, including against foreign entrepreneurs. These activities are aimed at increasing state budget revenues and countering tax evasion. Below are the latest trends in tax audits conducted by the Polish tax authorities. Currently, the most common subjects of audits are: VAT, PIT, withholding tax and transfer pricing. The particular focus of the authorities on VAT audits is related to the large share of the VAT gap in GDP and the VAT settlement system in WDT (intra-Community supply of goods) and WNT (intra- Community acquisition of goods) as conducive to abuse in the form of tax carousels. In addition, tax authorities have effective tools to verify the accuracy of VAT settlements, which encourages a greater tendency to conduct audits in this regard.
Less popular directions of tax audit include CIT and excise taxes. The low number of CIT audits is related to KAS’s risk assessment of CIT calculations as medium or low. Also important is the high level of complexity of CIT proceedings and the lack of adequately qualified staff and organizational changes. Also important is the increase in the number of checking activities, which provide faster budget receipts and are less procedurally complicated. In the case of excise taxes, on the other hand, the prevalence of customs and tax audits in this area is significant.
At present, foreign entrepreneurs operating in Poland are under strict control in the field of goods and services tax. Special attention is being paid to so-called VAT carousels, i.e. schemes aimed at defrauding VAT refunds. Entrepreneurs can expect more frequent cross-checks (i.e. inspections resulting from a counterparty) and verification of the compliance of VAT declarations with actual business operations.
Polish tax authorities are increasingly focusing on analyzing the holding structures of foreign companies operating in Poland. The goal is to identify the company’s actual place of business and verify that these structures are not being used for tax avoidance. In practice, this means more frequent inspections of corporate documentation and an examination of where management decisions are actually made. Current regulations allow Polish tax authorities to cooperate with foreign tax administrations, making it much easier to exchange information and identify irregularities.
One of the key areas of tax audit is transfer pricing, i. e. the pricing policy used in transactions between related entities. Polish tax authorities are increasingly carrying out checks to check whether the prices used in these transactions are in line with the market principle. New regulations on transfer pricing documentation that require traders to provide more detailed reporting and benchmarking.
Recent trends in tax audits indicate an intensification of audit activities, especially in the areas of VAT, PIT, transfer pricing and withholding tax. A great deal of attention is being paid to cash transactions, financial flows and the identification of real beneficiaries. Thanks to OECD membership and EU information exchange programs, Polish tax authorities have access to a broad database of cross- border transactions. Tax compliance and transparency in the conduct of business are key to avoiding potential problems and sanctions.
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