See also our article in Polish: Czy warto męczyć „biznes” – należyta staranność VAT aktualnie

Exercising due diligence isn’t just a defensive tactic – it’s a way to protect (i) your company from serious financial consequences as well (ii) the representatives of the company (management board, tax and accounting specialists, employees from procurement and sales teams) from individual fiscal penalties provided by the Polish law.

VAT gap – due diligence still matters

After years of difficult experiences with VAT fraud, numerous disputes remain pending before Polish courts, and systemic risks are still evident. While the VAT gap in Poland had been shrinking for several years, the latest assessments suggest that in 2024 it likely stabilized or only slightly decreased, according to the Polish Ministry of Finance remaining at a double-digit level – around 10.5%. This follows a period of renewed concern about fraudulent invoicing practices and carousel fraud structures, which continue to be identified by Polish tax authorities.

Therefore, due diligence (acting in a good faith, with due care) in VAT might seem like just another bureaucratic burden – especially for international businesses operating in Poland. But recent developments in tax rulings and court decisions show that Polish tax authorities and courts still treat and will treat due diligence as a key element of VAT compliance.

In practice, Polish approach towards VAT issues holds taxpayers responsible for verifying the reliability of their suppliers and customers. This means that if your business is caught up in a VAT fraud chain – even unknowingly – you can lose your right to deduct VAT or to use 0% VAT rate unless you can demonstrate that you acted with “due diligence” in selecting your counterparty.

This principle has been a part of Polish tax practice for years and has been reaffirmed both in the Ministry of Finance’s guidelines and in numerous court judgments.

Have a question or need support?

Contact us

A real case from recent months – first stage of the business relationship

Let’s look at a case initiated in 2020, finally resolved before the Polish Supreme Administrative Court (NSA) – judgment I FSK 1662/20. The company in this case got involved in a transaction with a UK-based entity (“Company GB”), which turned out to be a fraudulent actor. A Polish company manufacturing metal products (such as containers, barriers, fences, etc.), which has been operating on the market for over 25 years and sells approximately 90% of its goods to foreign entities, entered into a transaction with Company GB. The buyer’s representative sent an email to the company, identifying himself as an employee of a well-known entity and expressing an interest in establishing cooperation. The verification steps undertaken by the company were consistent with the procedure it had been following for years. The sender’s email address and signature both indicated that he was, in fact, affiliated with the company he claimed to represent.

The taxpayer, relying on email and phone communication with a person claiming to represent Company GB, applied the 0% VAT rate to supplies that were intended to be delivered to the United Kingdom.

In the judgment, the court noted:

“The complainant did not demonstrate that there was no way (either before or after the delivery of the goods) to predict that Company GB was not the actual buyer, especially since its trust in the contractor was based only on telephone or email correspondence with an unverified person, particularly given that it had never previously cooperated with that company. The question of whether the person claiming to represent Company GB was actually acting on behalf of that entity should have been verified by the complainant, especially since it was establishing a business relationship with that entity for the first time and had never previously delivered goods to Company GB. That such verification was both possible and desirable is also evident from the facts described by the complainant in the request for a tax interpretation, where it was stated that: ‘...contact with Company GB's headquarters and its bank confirmed to the company that it had fallen victim to fraud.’ Therefore, the company can be blamed for negligence by failing to verify the identity of the person who placed the order.”

This quote is telling. It shows that Polish courts expect companies to actively check who they are dealing with – especially when the relationship is new. Simply having a contract or exchange of emails may not be enough.

Key takeaways

If you’re managing a Polish company or you’re a part of the processes connected with purchase and sales activities, you should note following aspects of the Polish VAT reality:

  • Initial counterparty checks matter: authorities will examine how your company verified its trading partners, especially in the early stages;
  • “Good faith” isn’t enough: you must be able to prove you did your homework. Inaction or blind trust may be seen as negligence (that is why written procedures showing how the process is structured are viewed as a first step of security in Poland);
  • Documentation is crucial: Keep records of all (key) verification steps, not just contracts. This includes emails, confirmations from official registers, and proof of identity and authorization of persons involved;
  • Look on the practical hints from Polish market (how the taxpayers, especially included in the Polish Horizontal Monitoring Program, structured the process)
    • review internal procedures for counterparty onboarding (not only from pure financial perspective);
    • train your teams (especially procurement and sales) to document verification steps;
    • informal communication channels are insufficient – use official databases such as the EU VIES register, Polish White List of VAT taxpayers, and KRS (National Court Register) to confirm company and representative details before sales / purchase is made;
    • consult your tax advisors if you're unsure whether your current process meets the Polish standards of due care (please note that Polish Ministry of Finances published the brochure on Due diligence methodology);
    • remember about periodical (re)check of the procedure itself as well of the vendor / customer.

Ensuring proper due diligence is not simply a compliance checkbox. It serves as a strategic defense mechanism that protects your business from the consequences of involvement in fraudulent VAT chains. Polish tax authorities and courts continue to impose strict standards – and recent case law confirms that neglecting the onboarding process can lead to serious financial as well individual consequences.