A new, dangerous tool in the hands of the tax authorities

The Ministry of Finance is working on an amendment to the VAT Act that would extend the joint and several liability mechanism (Article 105a) from the current supplies of “sensitive” goods to intangible services. Joint and several liability for VAT shown on invoices for such services would apply to an exceptionally broad catalogue of services—from consulting and management, through HR, accounting and advertising, to hosting, software-related services and administrative office support. This intention stems from the diagnosis that fictitious invoices for services have become a significant channel for VAT fraud.

What applies today and what will change

Currently, joint and several VAT liability covers purchasers of so-called sensitive goods and services—mainly metals, electronics and construction works. It applies where the purchaser knew or had justified grounds to suspect that the VAT from a given supply would not be paid to the tax office. The risk of liability is excluded when payment is made using the split payment mechanism (SPM/MPP). This is the reference point from which the proposed regulations are set to depart.

The draft provides for two major changes. First, within the existing scope of the regulations, the “safe” threshold of PLN 15,000 would be abolished—although this is certainly the less significant change. Second, the protection resulting from split payment would be excluded in cases of fraud (e.g., where the purchaser knew that the invoice was “empty” or issued by a non-existent entity). The target date for the changes to enter into force is 1 July 2026.

When a taxpayer will be in the crosshairs

The draft refers to the concept—known from Article 105a—of “justified grounds to suspect.” In practice, red flags are considered to include unusual transaction terms and a price significantly below market value without a rational justification. Experience with goods shows that these are objective premises that tax authorities like to examine, and the burden of demonstrating due diligence then shifts to the purchaser. The same logic is intended to apply to services listed in Annex No. 16.

Split payment will help… but not always

Split payment remains an important tool for limiting risk, but the draft amendment clearly narrows its protective role. If the purchaser knew that the invoice documents a transaction that did not take place, contains amounts inconsistent with reality, or comes from a non-existent entity, then paying under split payment will not exclude liability. This is meant to cut off the practice of “legalizing” fictitious invoices by transferring funds to a VAT account.

What this means for finance, accounting and procurement

If the changes enter into force in the proposed form, payment under split payment alone will not be enough. The purchaser will have to demonstrate that they actually verified the service provider and the course/performance of the service—especially where a “tangible” outcome is harder to prove than with goods. In the background, it is worth remembering the ministry’s “Due Diligence Methodology” (guidelines for purchasers), which—although historically concerned goods—well illustrates expectations regarding verification of counterparties and transactions.

Due diligence for services—what to do?

Experience with “VAT due diligence” for goods indicates that, in disputes with tax authorities, cooperation among three business functions is key: procurement (selection and collecting documentation on the contractor), finance/accounting (formal correctness and payment verification: split payment, White List), and the business side (substantive confirmation of performance and verification of market pricing).

A good practice will certainly be, for example, attaching to each invoice a set of evidence that fully tells the story of the transaction, such as: the contract/SOW with a description of deliverables, an acceptance protocol/report, KYC confirmations (VAT status, White List, KRS/CEIDG—together with the date and the person performing the verification), a note on the market nature of the price, and proof of payment (as a rule under split payment) to the correct account. Such a package genuinely strengthens the purchaser’s position.

Documents, documents, documents

After numerous technological changes affecting the tax area in recent months and years, we will face another very large and entirely new tax challenge/obligation. The scope of this change and the scale of its impact on taxpayers are universal and practically unlimited. Even exemplary use of split payment will not be a shield if the transaction turns out to be fictitious or the counterparty “paper-only.” A robust, applied and documented due diligence procedure—with an audit trail for each invoice—may become the primary defence tool for taxpayers. It is worth preparing for this now, for example by mapping existing and future service costs, reviewing contracts, and implementing counterparty verification and documentation-collection processes based on strict system settings.

As with any other tax challenge, we will be pleased to support you with our assistance and extensive experience.