SK&S tax team obtained a favourable judgment of the Regional Administrative Court (Wojewódzki Sąd Administracyjny) regarding the taxpayer’s compliance with due diligence requirements in relation to VAT

On 15 July 2020, the SK&S team composed of Sławomir Łuczak (Partner) and Karolina Gotfryd (Associate) obtained for one of our clients from the FMCG industry a favourable judgment of the Regional Administrative Court (WSA) in Białystok. The judgment confirmed that when examining whether taxpayers have exercised due diligence in respect of VAT in their transactions with business partners, the tax authorities should in particular take into account the evidence concerning the concerned taxpayer.

In an oral justification of its judgment, the WSA indicated that the tax authorities should not assume that the taxpayer was acting in bad faith and failed to exercise due diligence only on the basis of the collected evidence which focuses on entities involved in the earlier stages of trading in goods that might have participated in fraudulent transactions. In the Court’s opinion, the tax authorities neglected to examine the remaining evidence related to the concerned taxpayer. And such evidence should be particularly taken into consideration in the process of assessing whether or not the taxpayer exercised due diligence.

The described judgment confirms that the exercise of commercial due diligence by taxpayers should not be assessed only based on the fact that other entities appearing in a supply chain participated in illegal practices involving VAT fraud.