The mere fact that cross-checks have been initiated on the taxpayer’s business partners does not constitute sufficient grounds for delaying the VAT refund.
Client's situation
Our client operated a business in the metal trading sector. In connection with their VAT return, they applied for a tax refund within the accelerated 25-day timeframe.The tax authority extended the deadline for the refund until the completion of verification procedures concerning the client’s business partners’ tax returns. This verification was carried out by other tax authorities, which were conducting audits of entities involved in the supply chain.
Consequently, the deadline for the VAT refund remained dependent on the conclusion of the proceedings against other entities. It was therefore of key importance to the case to determine whether the mere fact of awaiting the results of audits carried out at the trading partners’ premises could justify the continued withholding of the VAT refund due to the Client.
The issue
DMS TAX’s task was to represent the client in proceedings before the administrative courts, challenging the authority’s failure to act in relation to verifying the validity of the VAT refund.
Our approach
We represented the Client in proceedings before the administrative courts, challenging the authority’s failure to act in verifying the validity of the VAT refund.As part of the proceedings, we put forward the argument that making a VAT refund conditional upon the completion of audits conducted by other tax authorities at the Client’s business partners’ premises cannot lead to an unjustified delay in the tax refund. We also pointed out that making the refund conditional upon the establishment of the entire supply chain goes beyond the scope of the activities necessary to conclude proceedings concerning the validity of a VAT refund.
The Provincial Administrative Court in Wrocław accepted the arguments put forward and found that the authority had failed to act. The authority lodged a cassation appeal against the judgment with the Supreme Administrative Court.
Ruling and outcome for the client
In the grounds for its judgment, the Supreme Administrative Court noted that, in the Client’s case, the authority had essentially remained inactive, awaiting the results of audits conducted by other tax authorities. At the same time, the court emphasised that conducting audit proceedings against business partners is not in itself impermissible; however, in the case in question, waiting for them to be completed could not justify the authority’s course of action.
The Supreme Administrative Court’s judgement was described as landmark and represented a significant contribution to the debate on the practice of tax authorities regarding the extension of VAT refund deadlines. The ruling confirmed that the mere fact of conducting cross-checks on a taxpayer’s business partners cannot constitute sufficient grounds for delaying a VAT refund.
DMS TAX’s arguments upheld by the Supreme Administrative Court – a favourable court ruling
The Supreme Administrative Court upheld the main part of the Provincial Administrative Court’s ruling in favour of the Client, finding that the mere initiation of cross-checks on the taxpayer’s business partners does not constitute sufficient grounds for delaying a VAT refund.In the grounds for its judgment, the Supreme Administrative Court noted that, in the Client’s case, the authority had essentially remained inactive, awaiting the results of audits conducted by other tax authorities. At the same time, the court emphasised that conducting audit proceedings against business partners is not in itself impermissible; however, in the case in question, waiting for them to be completed could not justify the authority’s course of action.
The Supreme Administrative Court’s judgement was described as landmark and represented a significant contribution to the debate on the practice of tax authorities regarding the extension of VAT refund deadlines. The ruling confirmed that the mere fact of conducting cross-checks on a taxpayer’s business partners cannot constitute sufficient grounds for delaying a VAT refund.
What this means
The ruling confirmed that the mere fact of carrying out cross-checks on the taxpayer’s business partners cannot constitute sufficient grounds for delaying a VAT refund.