Why is it worth checking the credibility of a contractor before signing a contract?
A key element to focus on is your company’s financial security. Doing business with an unreliable partner can have a number of negative consequences, but verifying a partner’s credibility can save you from these problems. Here are four reasons why verification is worth it!
Protection against loss of time and money
Engaging a dishonest business partner in fulfilling an order is costly. It’s enough that the customer doesn’t collect the ordered products – even if they are returned to you, you’ll lose time and incur shipping and packaging costs. The returned goods will have to be stored somewhere and then you’ll have to find buyers for them.
On top of all this, it may turn out that some of the goods were damaged in transit, making it impossible to sell them at full price. While each of these costs may be small individually, together they will certainly hit the wallet.
It can be particularly painful when a customer orders personalized products (gadgets with a company logo or items packaged in a specific way). Recovering the invested funds then becomes a daunting task, almost doomed to failure from the start.
Protection against tax consequences
The principle of due diligence in VAT has been in force for several years and applies primarily to purchasers of goods and services. They are obligated to exercise due diligence in two situations:
- when they enter into cooperation with a new contractor,
- when they enter into a transaction with an entity with which they have previously cooperated, but the new transaction involves goods not previously covered by the contractor’s industry or business profile.
Failure to exercise due diligence may result in the ineligibility to deduct VAT from the transaction.
Avoiding lengthy court proceedings
If a transaction falls through due to the contractor’s fault and incurs costs for your company, you will have the option to pursue your rights. However, this is neither quick nor cheap. Engaging in legal proceedings is time-consuming and generates further expenses – with no guarantee that the money will be recovered.
A protracted process is in itself a burden on your company – it consumes time and resources that could be allocated to further business development or pursuing profitable contracts.
Less risk of missing out on better opportunities
Finally, engaging with an unreliable contractor wastes your company’s processing capacity. You redirect it to a contract that, at best, will generate no revenue, and at worst, will generate losses. This is a missed opportunity that’s impossible to quantify, but is always a negative. Diligent verification of contractors will allow your company to avoid such situations.
Verification of company identity in official registers
Checking a contractor should begin with the official registers – CEIDG (Central Registration and Information on Business) and the National Court Register (KRS). This is the simplest and most effective way to verify:
- whether the company exists,
- whether it is actively operating (not suspended),
- whether the company is not bankrupt.
You can obtain an extract from CEIDG by visiting the Entrepreneurs’ Database and entering at least one of the available search criteria. This can include the Tax Identification Number (NIP), National Business Registry Number (REGON), National Court Register (KRS), company name, or even the owner’s name.
You can obtain KRS data using the Court Register Portal search engine.
How do I check which register to use?
If you’re unsure about the business model of the contractor you want to check, use the government’s Business Search Engine. After entering the Tax Identification Number (NIP), it will tell you which register to search for further information.
- In the CEIDG (Central Registration and Information on Business) you’ll find information about sole proprietorships and partners in civil partnerships.
- In the National Court Register (KRS), you can verify contractors operating within commercial companies, foundations, associations, and cooperatives.
Persons entitled to representation
In addition to basic company data, the National Court Register (KRS) also contains information about individuals authorized to represent the company. This is an important clue that will allow you to ensure that anyone wishing to do business with your company actually has the right to do so.
Verification of the contractor on the VAT white list
The VAT Whitelist includes all entities registered as VAT payers, as well as unregistered entities and entities that have been removed or reinstated from the VAT register. The VAT Whitelist allows you to verify your business partner for VAT purposes, meaning you can check whether the business partner you want to work with is an active VAT payer. However, you will also find information about any removal from the list.
Furthermore, the VAT Whitelist also includes the business partner’s bank account number. This is important: if the person you are contacting for any reason indicates a different account number for transferring funds, this is a serious warning that should be carefully checked.
You can check your VAT payer status by entering their details (account number, Tax Identification Number, National Business Registry Number, or entity name) in the VAT Whitelist.
Important
You can check the VAT whitelist for the data applicable on a specific date. This is important because it’s possible that a contractor is currently registered in the VAT register, but wasn’t at the time of the transaction (if you’re checking after the fact).
How to check a contractor’s solvency?
To ensure you’re partnering with a reliable company, you need to know how to check a contractor’s solvency. You can do this most accurately by using online – though often paid – debt reports. You can check potential contractors at, among others:
- Credit Information Bureau – BIK
- Economic Information Bureau – BIG InfoMonitor
- National Debt Register
- National Economic Information Bureau
- National Debt Register
In most of the above lists, however, entering a Tax Identification Number (NIP) isn’t enough to obtain the necessary information. Credit information and credit bureaus typically offer subscription plans that allow you to regularly check multiple contractors in their databases and download debt reports upon request.
How to verify a foreign contractor – in the European Union?
We’ve already mastered the verification of a domestic contractor. But what if we want to enter into a contract with a company based abroad? In this case, we can use several solutions.
System VIES
VIES is a VAT information exchange system – it is not a separate database – it is merely a search engine that checks the contents of national databases.
To use the VIES search engine, simply visit this address, select the Member State of the business partner you are querying from the drop-down list, enter their VAT number, and then select your own Member State and enter their VAT number. The search will return one of two results:
- Active number – means the entity is registered in the VAT register, and the search will display the EU VAT information for the queried entity.
- Inactive number – means the entity is not registered in the national database checked by VIES. This is due to one of three reasons:
- the VAT number does not exist,
- the VAT number has not been activated for intra-Community transactions,
- the registration has not been completed.
It is possible that the VIES system will not confirm the claims of a business partner who claims to be registered for VAT purposes. In such a situation, it is best to contact the tax office in the contractor’s country for verification or check with the relevant national trade register.
National commercial registers
Each country has its own system for registering commercial companies. The German Handelsregister, the Spanish Colegio de Registradores, or the Croatian Sudski registar – each of these institutions allows us to check the status of a contractor (registered or unregistered). A complete list of national commercial registers, along with links, is available on the EU e-Justice portal. The same portal also offers a company search engine within the BRIS system, which works similarly to the VIES system.
Important
Contractors based in Poland can also be verified in the above-mentioned ways.
How to check a contractor from a non-EU country?
If you want to cooperate with a contractor based in a country outside the European Union, you may need to consult specific databases or order a report from an international credit bureau. Let’s start with a simpler solution.
National (or state) search engines and trade databases
- You can search for companies from the United States using the NASS directory – however, this is not a database, but merely a search engine that, after selecting a state from the drop-down list, will redirect you to the search engine appropriate for that state.
- You can theoretically check for companies from China in the National Enterprise Credit Information Publicity System (NECIPS) database. The website is entirely in Chinese, so you may need to use automatic translation. To verify a Chinese business partner, you will need the company name (important: this is the Chinese company name, not the English one, as this is the name under which the company will be registered in the system) or the company registration number.
- Companies from the UK are best verified using Companies House. You can check their UK VAT number using the government’s search engine.
For business partners from other countries, the process is similar – find the official business register in your country, and then fill out the search fields with basic information provided to your company by the potential business partner.
International business intelligence agencies
Many online search engines can be helpful, but they won’t answer questions about a contractor’s credibility. They’ll tell you whether the company is active, registered for VAT purposes, and whether the information provided by the person contacting your company is authentic. All of this is important, but it doesn’t always provide key information about the contractor’s financial situation or debt.
Specialized debtor registers and reports prepared by international credit bureaus can address these needs. These rely not only on publicly available data from government or state search engines but also monitor websites, company materials, media publications, social media, legal events, financial statements, and debtor registers.
Using the services of a credit bureau requires a fee, but when large sums of money and significant uncertainty about a potential contractor are at stake, it’s certainly an option worth considering.
Additional verification methods: online reviews and social media
Now that you know whether a company exists and is solvent, it’s worth checking how it’s being talked about online. This step shouldn’t be skipped. What can you do?
Check the company’s listing on Google
Simply enter your company name in the world’s most popular search engine. If the company has a Google listing, you’ll find basic contact information, an address, reviews, a website link, and opening hours. Check if the information matches what you already have, and then copy the company address.
Verify your business address on Google Maps
This is a simple solution that can tell you a lot about a business partner. There have been cases of fraud detected precisely because the address provided by a potential business partner didn’t exist or was the registered office of a completely different company. Make sure the address provided by the person contacting you is the actual registered office of the business.
Check out social media profiles and reviews
Make sure the company is active on social media. While there’s no obligation to do so, an active social media profile that provides contact information and posts regularly signals that the company is truly active in various fields. A lack of any social media activity or “dead” profiles (without any activity for a long time) should be a red flag.
Also, check what people think about working with the company. Don’t just rely on average Google ratings, though. Check various rating sources and customer reviews—both positive and negative. Pay attention to whether and how the company responds to customer concerns.
Use AI tools to gather information about your contractor
While this shouldn’t be the only way to verify a business partner, it’s worth utilizing available models like Claude, Gemini, or ChatGPT. With a few targeted questions, you can obtain information about your potential business partner. However, remember to verify the sources cited in the results provided by AI search engines.
Summary
Verifying both domestic and foreign contractors should be a crucial step before entering into cooperation. While this work may seem tedious and time-consuming, it will certainly take less time and resources than attempting to withdraw from the relationship or recover incurred costs if it turns out the contractor is dishonest or is experiencing serious financial difficulties.
Also, remember the principle of due diligence – if, as a buyer, you do not thoroughly verify the contractor, you may also face tax consequences, such as being unable to deduct VAT on your purchases.
Frequently asked questions
Why is it important to verify a contractor before establishing cooperation?
By thoroughly vetting your business partner, you’ll avoid:
- Loss of time and money.
- Long-lasting legal proceedings.
- Tax consequences.
What’s more, opting out of a potential business partner as a result of thorough research benefits your company. This allows you to focus your efforts on finding a reliable, trustworthy business partner.
Where to check a Polish contractor?
It’s best to check companies operating in Poland at several levels:
- Check the CEIDG (Central Registration and Information on Business) and the National Court Register (KRS) to see if the company exists and whether it is not in bankruptcy or suspended.
- Check the VAT Taxpayer Register (VAT Whitelist) to see if the contractor is registered for VAT purposes.
- Check the credit bureau (e.g., BIK, BIG InfoMonitor, KRD) to see if the potential contractor is solvent and debt-free.
In which databases should I verify a contractor from the European Union?
You can verify companies and partnerships operating in the European Union using:
- The VIES system.
- The EU e-Justice portal.
- National commercial registers (e.g., the German Handelsregister or the Spanish Colegio de Registradores).
Jak sprawdzić kontrahenta zagranicznego spoza UE?
You can verify the accuracy of the data provided to your company by a potential client or partner outside the EU by using national or state databases.
- In the USA, the NASS Corporate Registration directory allows you to find the appropriate search engine for the state where the company you are checking operates.
- In China, the NECIPS database operates.
- In the UK, use Companies House or the search engine on the gov.uk website.
