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VAT Due Diligence – What You Need to Know to Sleep Well

  • Writer: Paweł Gorzelec
    Paweł Gorzelec
  • Jul 10
  • 2 min read

In recent years, there has been increasing talk of "due diligence" in VAT. This concept has gained importance with the growing number of tax audits and the fight against tax fraud. Businesses must be vigilant – not only to account for VAT correctly but also to cooperate with contractors who operate legally. What does this mean in practice? When and how should due diligence be exercised?

Why is due diligence so important?

According to the Ministry of Finance's methodology, tax authorities assess whether a business entity exercised due diligence, including when establishing or continuing cooperation with a contractor. Failure to do so may result in liability for tax irregularities resulting from the transaction, even if the business entity acted in good faith.

Cooperation with a new contractor – checklist

Entrepreneurs must be especially careful when starting a collaboration with a new business partner – especially if the transactions involve entirely new products or industries. What's worth checking?

  1. The contractor’s registration status – make sure that the company is listed in the National Court Register (KRS) ( https://ems.ms.gov.pl/krs/wyszukiwaniepodmiotu ) or CEIDG ( https://aplikacja.ceidg.gov.pl/ceidg/ceidg.public.ui/search.aspx )

  2. Entry into the register of VAT payers (so-called White List) https://www.podatki.gov.pl/wykaz-podatnikow-vat-wyszukiwarka – check whether the contractor is an active VAT payer.

  3. Required licenses and permits – if the transaction requires them.

  4. Authorizations of persons acting on behalf of the contractor – e.g. based on data from the National Court Register.

  5. Transaction terms – pay attention to the price, business profile, place of business, share capital and organizational and technical support.

These activities not only protect you against tax risks, but also help build reliable business relationships.

Continuation of cooperation – do not forget about periodic verification

Even if you've been working with a contractor for years, this doesn't exempt you from exercising due diligence. Regularly check:

  • whether the contractor is still an active VAT payer,

  • whether it has the required permits,

  • whether the data of persons acting on his behalf are up-to-date.

This is especially important in the case of long-term contracts or ownership changes in the company.

What about the split payment mechanism (MPP)?

Payment for goods using MPP (split payment) works to the taxpayer's advantage - in the event of an audit, it is considered that due diligence has been exercised, provided that other formal conditions have been met and there are no suspicious circumstances of the transaction.

Summary

For a tax official, "due diligence" means concrete, demonstrable actions. For an entrepreneur, it means protection against joint and several liability and peace of mind. Whether you're working with a new or familiar partner, document, verify, and don't act thoughtlessly.


 
 
 

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