Due Diligence

In Poland, tax authorities very often deny taxpayers the right to deduct VAT due to the finding that the taxpayer did not exercise due diligence and should have known that he was participating in a supply chain in which tax fraud could have occurred.

Taxpayers, in order to avoid having their tax accounts challenged, face the difficult task of proving that they have exercised due diligence in their transactions with their counterparties. Moreover, no national laws indicate exactly what ‘due diligence’ is, leading to increasingly restrictive interpretations by tax authorities.