Support in preventing VAT fraud and in related proceedings

Companies unknowingly participating in transactions aimed at committing VAT fraud may face important costs, affecting both the organization itself and the staff responsible for tax settlements. Failure to exercise due diligence in commercial transactions demonstrated by tax authorities may entail important tax arrears, penalty interests and VAT sanctions, with additional risk of penal fiscal liability for the staff responsible for making tax settlements and aggravated penalties imposed.  Furthermore, the fact of being a party to an abusive transaction or a chain of transactions of which one turned out to be abusive may lead to the company’s bank accounts being blocked under the Polish Act for counteracting frauds and other irregularities (commonly referred to as “the STIR Act”).

This is why our experts, equipped with extensive knowledge and in-depth experience in the area of proceedings on VAT fraud, best practices in due diligence, VAT fraud schemes and identifying potential irregularities, developed an array of tax advisory services limiting the negative effects of VAT fraud for honest entrepreneurs.

KPMG may provide you with a comprehensive analysis of circumstances and parties to transactions that raise your doubt, in particular against the possible risk of VAT settlements being challenged by tax authorities.

As part of the support provided, KPMG will analyse the circumstances of the transaction and data on parties thereto, drawing from information provided by the client, publicly available data and experience from previous proceedings on carousel fraud tax schemes, relying on the extensive knowledge of case law, tax fraud patterns, and best practices in due diligence.

Based on its experience and the information collected, KPMG assesses the risk of VAT settlements in the analysed transactions being challenged and formulates recommendations on further steps to be taken by the company (due diligence, establishing the line of defence, etc.).

To mitigate the risk of becoming an unknowing participant of a fraudulent transaction or being faced with accusations of not exercising due diligence for our clients, we want to assist them in establishing and implementing procedures to ensure that the due diligence requirements are met both when it comes commercial transactions and VAT settlements.

The procedures are formulated based on the information on business processes of the company - acquired through surveys and document analysis -, risks incumbent on the industry, and our experience in the field.

The procedures developed encompass activities which should be carried out to mitigate the risk of VAT settlements being challenged by tax authorities. Importantly, the procedures may largely contribute to decreasing the risk of penal fiscal liability related with VAT settlements.

In the event of becoming aware of suspicions as to the reliability of transactions both in which the company directly takes part or which is carried out at the other stage of the chain, KPMG may conduct an analysis of risk of the correctness of the client's settlements being challenged and help in preparation of a defence strategy in the event of a tax inspection, launching criminal tax proceedings or blocking the company’s bank accounts.

Drawing from extensive experience in conducting proceedings involving parties unknowingly participating in transactions aimed at VAT extortions, KPMG may support you at the stage of control activities, inspections and proceedings before tax authorities and courts.

The current practice of tax authorities in the field of proceedings related to VAT fraud points to a far-reaching pro-fiscal approach. At the same time, such proceedings often involve honest taxpayers and not the entities actually responsible for committing tax frauds, specialized in abusing other market entities and tax authorities, long gone when the proceedings start.

Proceedings related to possible VAT abuses are very complex and time-consuming. In fact, positive resolution thereof to a large extent relies on the adopted defence strategy and the approach of the entities representing the taxpayer. KPMG specialists have many years of experience in supporting clients in tax fraud proceedings, which increases the chances of a positive resolution before tax authorities and in court.