Lack of VAT registration
According to the VAT Act, VAT taxpayers are required to submit a registration application to the Head of the Tax Office prior to conducting their first taxable activity. The registration application is an obligation of a formal nature, which in no way determines the status of a VAT taxpayer.
The status of an entity as a VAT payer is an objective category and does not depend on the fact of being registered as such.
Consequently, when we are dealing with an entity that performs taxable activities for profit and on a continuous basis, such an entity will be considered a VAT taxpayer despite not filing a VAT-R form.
Carrying out activities subject to VAT results in tax obligations arising on the part of the supplier or service provider. In turn, the performance of a taxable activity must be documented by an invoice. An invoice is a strictly formalized document which confirms the occurrence of a specific event that results in a tax liability. It is apt to ask whether an unregistered VAT taxpayer falls into the category of entities entitled to issue an invoice. The answer to this can be found in court decisions (cf. the judgment of the Supreme Administrative Court of November 15, 2012, ref. I FSK 2057/11).
The seller's failure to register as an active VAT taxpayer does not automatically deprive the buyer of the right to deduct input tax (cf. CJEU judgment of October 19, 2017 C-101/16). The buyer of goods should exercise due diligence and take all measures that can reasonably be expected of them in order to be sure that the transaction being made does not lead to participation in a tax crime.
In cases where the buyer is unknowingly involved in a VAT extortion scheme by another entity, the buyer's due diligence is crucial in preserving the right to deduct VAT from an invoice issued by the fraudulent party. One of the most significant indicators of due diligence is the buyer's verification of the seller's VAT status.
On the other hand, a buyer who has not formally registered for VAT purposes is deprived of the right to deduct input tax contained in the VAT purchase invoice received. This results directly from the provisions of the Polish VAT Act. However, in a situation where the right to deduct VAT has not yet become time-barred, and such a taxpayer makes a formal registration, it will be possible to exercise this right.
Retroactive VAT registration
As for the possibility of "retroactive" VAT registration, there is no longer any doubt as to its admissibility. An entity becomes a VAT taxpayer by operation of law, i.e. no formalities are required to determine a taxpayer as such. All that’s required is the performance of an activity subject to this tax when conducting business. Therefore, in the registration form, it is possible to indicate the date from which the performance of taxable activities commenced, even when this date has already passed. In such a situation, in order to avoid criminal consequences, it is necessary to submit the so-called Voluntary Disclosure form along with the registration form.
In the context of intra-Community transactions, there is no retroactive registration. When carrying out intra-Community supplies without registering for EU VAT, the 0% VAT rate will not apply to these transactions. Therefore, it is important to make every effort to submit a registration application prior to making the first intra-Community transaction.
Registration through an intermediary
The process of registration, depending on how it is conducted, may be linked with an emergence of risk. This is due to the fact that when registering a taxpayer whose application was submitted by an intermediary, the intermediary becomes jointly and severally liable with the registered taxpayer up to the amount of PLN 500,000 for the taxpayer’s tax arrears originating from activities performed within 6 months from the date of registering as an active VAT taxpayer. The intermediary is exempt from this liability only if the emergence of tax arrears was not related to the taxpayer's participation in dishonest tax settlements for the purpose of financial gain.
Bank account
Although a taxpayer is not required to have a bank account in a Polish bank or a branch of a foreign bank in Poland to register for VAT, there are certain circumstances when such an account becomes mandatory.
This applies to the sale of goods and services subject to the mandatory application of the split payment mechanism (pl. MPP). For this purpose, such a bank account is necessary, because in accordance with the provisions of the Banking Law in Poland, these accounts, through the separation of a sub-account within them, the so-called VAT account, enable sending and receiving payments under this mechanism. Simply stated, this mechanism involves splitting the payment into two parts, i.e., the VAT amount and the net amount of the transaction value.
The lack of an account in such a situation may result in the buyer not being interested in cooperation. The buyer's failure to pay for goods and services covered by the split payment mechanism using MPP may result in a penalty imposed by the Tax Office on the buyer in the amount of 30% of the value of VAT for items shown on the invoice that should have been paid for via this mechanism.
VAT refund
Another inconvenience that may affect entities without a bank account maintained by a Polish bank, or a Polish branch of a foreign bank, is the receipt of a VAT refund.
In a situation where a taxpayer’s input VAT exceeds output VAT, the taxpayer may apply for a refund of this tax to the taxpayer's bank account. Under Polish regulations, such a refund can only be made to a Polish bank account.
At this point, it should be added that the bank account for a VAT refund must belong to the taxpayer claiming the refund. Thus, it is not possible to use another entity's bank account for this purpose.
