Foreign businesses operating in Poland often need to appoint a tax representative to properly account for VAT in Poland. Acting as a tax representative, for entities like CRIDO, involves considerable responsibility but also offers an opportunity to build long-term relationships with clients. It is crucial to be aware of the risks and to carefully manage the information provided by the client so that to ensure tax security for both the taxpayer and tax representative.

Have a question or need support?

Contact us

The article will examine the practical aspects of this role and the challenges it presents when collaborating with the clients.

When is a tax representative required?

The obligation to appoint a tax representative applies to taxpayers from outside the European Union (who do not have a registered office or permanent place of business in a Member State), with exceptions for taxpayers from Norway and the United Kingdom, as Poland has signed agreements on administrative cooperation and combating tax fraud with these countries (taxpayers from Norway and Great Britain do not have to, but may, appoint a tax representative).

Joint and several liability with the taxpayer

The tax representative is jointly and severally liable with the foreign taxpayer for his VAT liabilities. This means that the representative is responsible for the accuracy of VAT settlements and any potential tax arrears of the taxpayer in this respect. Due to the extensive scope of responsibility, but also the requirements imposed on a tax representative, not every tax advisor is willing to perform this role, even if they provide accounting or VAT compliance services [1].

A recently issued tax ruling confirms that this responsibility begins at the moment the tax representative is established and covers arrears arising after that date. Therefore, if the tax representative submits corrections of the taxpayer's VAT returns for periods preceding the appointment of a representative, their responsibility is limited to the transactions underlying the correction [2].

Payment of VAT liability by the tax representative

The tax authorities also confirmed that a tax representative has the right to settle VAT payment on behalf of the taxpayer they represent (including liabilities exceeding 1,000 PLN) in several ways:

  1. a direct transfer of funds from the taxpayer to the representative’s bank account, from which the tax liability is paid to the tax office.
  2. a transfer of funds through an intermediary, who then forwards them to the representative’s bank account.
  3. payment of VAT liability by the representative from own funds, prior to receiving funds from the taxpayer.

It is advisable that the content / description of the payment proof clearly indicates that the funds are intended to cover the VAT liability of a specific taxpayer.

Liability for undisclosed transactions

A controversial issue is the representative’s liability for undisclosed taxpayer’s transactions. The Director of the National Tax Information Office stated that the representative is jointly and severally liable for liabilities arising from the taxpayer’s failure to provide information on economic events affecting VAT settlements.

This decision leads to the conclusion that a tax representative should actively monitor the completeness of data provided by the client, which can be challenging when dealing with international companies carrying out significant transaction volumes.

When undertaking the role of tax representative, it is worth considering a communication path between client and tax advisor so that the tax representative can obtain information on the client’s business decisions relevant to Polish VAT settlements.

Tax representative – risk or new opportunities?

The cited tax ruling is of great importance for entities acting as a tax representatives for foreign VAT taxpayers operating in Poland. On one hand, it confirms the flexibility regarding VAT liability payments, potentially making it easier for foreign entities to fulfill their VAT obligations. On the other hand, the interpretation of joint and several liability for undisclosed transactions may increase the risk associated with this role.

Thus, the tax representative should:

  • clearly define the scope of duties and rights in an agreement with the taxpayer.
  • implement secure control mechanisms, such as a system for verifying information provided by the client.
  • regularly update procedures and settlements based on best practices and new tax rulings.

[1] The criteria that a tax representative must meet are specified in Article 18b of the VAT Act.

[2] Individual tax ruling of the Director of the National Tax Information Office dated September 2, 2024, ref. 0114-KDIP1-2.4012.409.2019.10.WH.

See also:

Fiscal Representative in Poland