What are your risks by cooperating “in the dark”?
You can be very lucky and immediately come across an honest, reliable and timely contractor with whom cooperation will be a pure pleasure. However, there is no point in relying on luck if you have the opportunity to verify the company you want to do business with. Especially since it carries specific risks. Here’s what’s at stake.
Loss of money and goods – it is your company’s money that you risk the most when you neglect to verify contractors. A dishonest buyer may try to stall the moment of payment for received goods, exposing your company to losses. Criminals, posing as a transportation company, may try to steal goods entrusted to them. The situation described may seem unlikely, but that doesn’t mean it won’t happen for sure.
Waste of time – even if you recover your money and goods, even if you manage to catch the criminals and your company was insured, you will lose a lot of time explaining the situation and asserting your rights. And, as we all know, time is money.
Tax liability of the buyer – this is a rather specific case in Polish law. Art. 105a para. 1 of the VAT Law states that a VAT payer who has purchased goods covered by Schedule. No. 15 to the VAT Act, shall be jointly and severally liable with the entity making the supply of the ordered goods for its tax arrears, in the part of the tax proportionally attributable to the supply made to it in a situation in which the taxpayer knew or had reasonable grounds to believe that the entire amount of the tax attributable to the supply made or part thereof would not be paid to the account of the tax office.
This provision implies that this can happen if the conditions and circumstances surrounding the delivery of the aforementioned. of goods deviate from the typical trading of these goods (for example, when the price was clearly lower than the market price).
Example:
The aforementioned Appendix 15 of the VAT Law covers a very wide range of goods and services. Among them are: coal and lignite, pipes and pipe fittings, gold, silver, base metals, computers, HDD and SSD hard drives, game consoles and a large part of electronics, but also fuels, recyclables or construction work.
Due diligence – failure to verify the counterparty is in practice a failure to observe the so-called “due diligence “. due diligence. Although due diligence has still not lived up to a defining provision, exercising it is crucial. If the fiscal proves that the company failed to exercise due diligence, it can impose a penalty for tax fraud committed by a dishonest contractor.
How to do due diligence?
So we verify contractors in order to avoid unpleasantness, make sure we do business with trustworthy companies, and do due diligence, for which verification is one of the most essential criteria. This is stated in a document issued by the Ministry of Finance in 2018.
We are talking about the “Methodology for assessing due diligence by buyers of goods in domestic transactions.” The 12-page document reads, among other things: o:
- the need to check the companies with which we want to start cooperation in the KRS and CEIDG,
- verification of VAT entity status in the Tax Portal,
- Checking whether the entity is listed in the KAS list for deletion from VAT,
- making sure that the entity has the required licenses and permits for the goods to be delivered,
- Verification that persons entering into an agreement or making a transaction have the authority to act on behalf of the counterparty (e.g., power of attorney).
Important!
The above list – according to the “Methodology…” is not closed. The authors of the document point out that in a given transaction there may be unspecified circumstances indicating the existence of a risk of involvement in fraud, which the taxpayer should also take into account.
Other important elements to check before you start working with a contractor:
- Place of business – not only is it important whether the company has a real address, but also whether the place of business is appropriate for the type and size of business.
- Identity of the counterparty or its representatives – this is important especially if you do not have the opportunity to meet the counterparty face to face. Verify whether a potential contractor even exists, pay special attention to photographs generated with the help of artificial intelligence algorithms. Insist on personal contact whenever possible, and keep all traces of correspondence.
- Insurance and contracts – if possible, check the insurance policies of the contractor (e.g., if he is to deliver goods on your behalf), as well as rental or leasing contracts for vehicles, warehouses, offices, etc., if they are related to the transaction.
Verify that the company is registered, in the CEIDG search engine
The Central Business Register and Information contains basic information about sole proprietorships and partnerships. To check whether the company you are about to start cooperation with is listed in CEIDG, it is enough to have at least one basic data about it. This will give the TIN, REGON number and even the name of the business owner.
The search engine is available at this link.
The CEIDG provides detailed information on each business activity. Among other things, you will find:
- The name of the owner of the enterprise,
- company name,
- TAX ID,
- REGON number,
- Current status of the company (active or suspended),
- business address,
- types of activities performed in accordance with the Polish Classification of Activities (PKD),
- contact information made available.
What should you pay special attention to? Check how long the company has been in business, whether it is still active, and whether there are any bankruptcy or reorganization proceedings against it.
Check the contractor in the National Economy Register (REGON)
Having the tax ID, REGON, KRS number or address of the entrepreneur, you can search the REGON database and find a range of information about the company you want to do business with.
In the National Economy Register you will find most of the information that also appears in CEIDG, but there is also a big difference between the two databases: REGON contains data on civil partnerships, which you won’t find in the Central Register (CEIDG only contains information on partners of civil partnerships).
Search the National Court Register
The National Court Register is the right base if the company you are working with is:
- general partnership,
- limited partnership,
- limited joint-stock partnership,
- Ltd,
- partnership,
- joint stock company.
In the KRS search engine you will find a lot of relevant information about the selected company. To search for a suitable entity, you must have at least one of the following data: tax ID number, REGON number, KRS number, company name. If you are unsure about any of the above, you can also search for companies registered in a particular locality. Just fill in the name of the province, county, municipality and town to get a complete list.
What to pay attention to when reading the KRS entry?
When analyzing the entry on the counterparty, be sure to check for information on the opening of liquidation. It means that the company has filed for liquidation and will soon cease operations. Also verify the method of representation. In this section you will find the people who have the authority to sign a contract with your company – board members and proxies. Also look at the dates of submission of financial reports – take into account the obligation to submit such a report once a year. If the company has not done so, confront this knowledge with its representatives.
Also carefully check whether liquidation proceedings have been opened against the company. Also look at any mention of transformations, divisions, mergers, bankruptcy, arrangement, reorganization or restructuring proceedings. It is also good to know whether a curator has been appointed for the company.
You can find the KRS search engine here.
Check the white list of VAT taxpayers
The list of VAT taxpayers is a database where you verify a contractor for VAT. To find information about a particular company, you need its name, tax ID number, REGON number or account number. An extremely important element of the list is the ability to check the status for a specific day. After entering one of the mentioned data, you just need to check the “change date” option and then select the date you are interested in from the calendar. In this way, it is easy to verify whether an entity was on the list on the day of the transaction, for example.
What else will you find out by checking the entry on the VAT white list?
- You will learn the name of the business person or the name of the company.
- You will check whether he is currently an active VAT payer.
- You will verify the date of registration for VAT.
- You will learn the date and reason for removal from the register.
- You will verify the bank account number to which you can pay your dues.
Important!
Making a payment to an off-list account risks joint and several liability for the contractor’s tax arrears. This applies to amounts exceeding PLN 15,000. To do your due diligence, check the counterparty on the VAT whitelist, and keep a printout or screenshot containing the necessary information in the documentation for the transaction in question.
Check your contractors – you can find a list of VAT payers here.
Search VAT Information Exchange System (VIES)
Cooperation with foreign entities does not mean that we do not have the right tools for verification. VIES is a list of taxpayers registered for EU VAT. Thanks to the search engine, you will check whether the company you are working with can make intra-Community transactions – a prerequisite for the 0% VAT rate.
What do you need to search for a contractor? All you need is the country in which the company is registered and the EU VAT number.
Important!
VIES is not a separate database – it’s just a search engine that works by exchanging information with the tax offices of European Union member states.
If the search is unsuccessful and the counterparty maintains that it is registered for EU VAT purposes, contact the counterparty and ask for verification with the tax authority of the country of origin.
Ask at the tax office
If you want to make sure that your business partner settles all taxes correctly, apply for a VAT taxpayer status certificate at your tax office. In response, you will receive a certificate with information about:
- mandatory declarations and documents submitted by the contractor,
- mandatory activities included in the aforementioned documents or declarations,
- tax arrears resulting from the above. documents or declarations.
Important!
This way is reserved for those who have already established cooperation with the verified entity. You cannot apply for a certificate confirming your VAT status if you are not a party to the transaction, but only want to check a potential business partner.
You can submit the application in person, during a visit to the office, by traditional mail or online, via business.gov.pl. Issuance of the certificate costs PLN 21.
Summary
Verifying a contractor, while sometimes time-consuming and involved, can save a lot of hassle for the entire company. A proven, reliable contractor, in turn, means a greater chance of a happy closing of the deal and earnings for your business. This is also one of the conditions for exercising due diligence.
