Insufficient verification of the contractor may result in the goods being handed over to the fraudster. It is worth considering how such a supply affects the company’s tax affairs. Particular doubts concern the legitimacy of VAT taxation. In an individual ruling of 7 June 2024 (ref: 0112-KDIL1-3.4012.156.2024.1.JK), the Director of the National Tax Information Service stated that the supply of goods that were the subject of theft is subject to VAT. Moreover, in the judgment of 26.09.2024 (ref. I SA/Po 401/24), the Provincial Administrative Court in Wrocław dismissed the complaint against this interpretation. This approach of the court differs from previous rulings in similar cases.
Substance of the case
The case described in the ruling concerned Company A engaged in the production and sale of wood pellets. It received an order from a company operating in France (Company B). After the initial verification, it was confirmed that such an entity did indeed exist, so as a consequence, so the order was consequently processed. The goods were delivered to the address indicated by the buyer. After the invoice payment deadline, Company A started debt collection. To this end, it sought the assistance of a French bailiff, who forwarded a demand for payment to Company B. After receiving a response from the Security Director acting for Company B, it turned out that no order had been placed on its part to Company A. Upon further verification, it was confirmed that Company A had been the victim of fraud.
In a ruling dated 26/09/2024, Company A asked the Director of National Revenue Administration, i.a. asking whether the supply made to France to the fraudster would be subject to VAT. According to Company A, the supply was not for consideration and there was no legal transfer of ownership of the goods, so it should not be subject to VAT.
Consequences of VAT for the taxpayer
In the discussed ruling, the Director of the National Tax Information Service stated that the supply of goods made from Poland to France was subject to VAT. In the understanding of the authority, the ownership of the goods had been transferred in the course of the supply, despite the fact that it had ended up in the hands of a fraudster. Moreover, according to the Director of the National Revenue Administration, Company A is not entitled to apply the 0% rate because it is not in possession of documents confirming the export of goods to France.
As a result, the taxpayer must apply the national rate of 23% to the supply of goods and pay the VAT due to the Tax Office. Company A disagreed with the position of the authority and filed a complaint with the Court, which was dismissed.
Summary
The verdict of the Provincial Administrative Court significantly changes the line of jurisprudence on the issue of taxation of supplies of goods that are the subject of theft. In previous years, court judgments on similar issues spoke in favor of the taxpayer.
We offer our support in the field of due diligence in the verification of contractors. We prepare a precise procedure and instructions for its application. As part of the assignment, we also conduct training for the company’s employees on how to use the procedure in practice.
