Cross-checks - they can control you and the contractor!
Pursuant to the Tax Ordinance Act, tax authorities carry out control procedures to check whether the taxpayer correctly fulfills the obligations arising from the provisions of law and the protection of the property rights of the State Treasury. These are: tax inspection, inspection activities and tax proceedings. Cross-checks are another procedure next to them. Find out what cross-checks are and what exactly they are!
Cross-checks - the essence
Cross-checks are carried out by tax authorities in connection with ongoing tax audits or tax proceedings. It is allowed under Art. 274c § 1 of the Tax Code.
Art. 274c. § 1. Tax Code
The tax authority, in connection with the conducted tax proceedings or tax inspection, may request the taxpayer's business partners to present documents within the scope of the taxpayer's control in order to verify their correctness and reliability. These activities are recorded in a protocol.
The aim is to verify the reliability of economic events by checking whether they are reflected in the contractor's documents. In other words, the tax office checks for fraud, e.g. in the form that one party showed a purchase while the other party did not show a sale.
The dishonesty (inconsistency with the actual state) of accounting documents is a fiscal offense punished by the court with a fine of up to 240 daily rates or imprisonment for up to 2 years. The daily rate is determined by the court and in 2015 it ranges from PLN 58 to PLN 700,000. It follows that the penalty for unreliable bookkeeping may be a fine of up to PLN 168,000,000.
The place of residence, seat or place of business of the contractor is not a problem for the tax authority. If they are outside the area of operation of the authority that carries out the control, it may request assistance from the authority competent for the contractor.
Cross-checks - how to be performed
The authority, deciding to cross-check, sends a request to the contractor. It describes the details of the inspection - it defines the scope of the inspection, as well as the list of documents necessary for submission. The documents to be made available are determined depending on what is needed to clarify the matter. Based on the scope of the inspection carried out, these can be entire VAT registers, invoices, payment receipts or individual documents. Additionally, the request contains information on how the documents are to be delivered.
Importantly, only the required documents can be checked, the tax authority has no right to undertake other checking activities. Counterparties, however, have the option of submitting explanations regarding the documentation, but they cannot constitute separate evidence (as testimony).
Cross-checks by counterparty settlement control?
Cross-checks are not aimed at comprehensive verification of economic events, but only to clarify a specific case. This means that during its duration, the tax authority cannot check the contractor's settlements in terms of accuracy and correctness (it is limited only to previously established documentation). Nevertheless, the commencement of such an inspection may lead to the initiation of an inspection or tax proceedings at the contractor in the future.