Joint and several liability and guarantee deposit on the basis of VAT

Service-Tax

October 2013 was the time of a revolution in the field of tax on goods and services in the field of taxation of steel trade. The introduced changes resulted in the introduction of the institution of joint and several liability of the buyer for the seller's tax arrears, as well as the possibility of paying a guarantee deposit, which excludes the buyer's risk as a result of the seller's actions.

What does joint and several liability mean?

The amended Act on tax on goods and services contains the rule according to which the taxpayer (whether registered as active or exempt) referred to in Art. 15 (who conducts business activity), for which the supply of sensitive goods was carried out pursuant to Annex 13 to the above-mentioned of the Act, is jointly and severally liable with the entity making this supply for its tax arrears in the proportion of tax attributable to the supply made to that taxpayer.

The detailed list in the said annex includes, inter alia, some steel products, raw gold or fuels.

Pursuant to Art. 105a paragraph. 1 of the VAT Act, the conditions for joint and several liability of the buyer and seller must be met at the same time. This is the case when:

  • the entrepreneur purchases sensitive goods specified in Annex 13,
  • the net value of purchased goods from one supplier in a given month exceeded PLN 50,000 and
  • at the time of delivery of sensitive goods, the taxpayer knew or had reasonable grounds to suppose that the entire amount of tax attributable to him or part of the supply of these goods would not be paid to the account of the tax office.

At this point, it is worth looking at the last premise relating to the legitimate grounds for unreliability of the seller. Well - it is primarily about circumstances that would differ from those standard, usually occurring in the trade of sensitive goods. An example may be the fact that a taxpayer has delivered goods at a price significantly different from its market value, and the reduction in value was made without economic justification.

Guarantee deposit, which is what?

Art. 105a sec. 3 and sec. 4 of the VAT Act indicates the taxpayer's right to exclude joint and several liability of the buyer, provided that the latter submits a guarantee deposit. The purpose of the payment of a certain amount is primarily to secure the interests of the State Treasury against possible tax arrears with the contributing entity.

Such liability will not arise if the following cumulative conditions are met on the date of delivery of the sensitive goods:

  • the seller's details will be included in the list of entities that have submitted the guarantee deposit and
  • the amount of the guarantee deposit was equal to at least one fifth of the amount of tax due for deliveries of goods made in a given month to a given taxpayer or the deposit was at least PLN 3,000,000.

As indicated in art. 105b paragraph. 1 of the VAT Act, an entity supplying sensitive goods, without tax arrears, may submit a guarantee deposit to the tax office as security for the payment of tax in connection with the delivery of these goods. The condition of not having tax arrears is assessed as of the date of submitting the guarantee deposit.

What's more, the amount of the guarantee deposit should correspond to at least one fifth of the amount of tax due on the sales value of the goods referred to in Annex 13 to the Act predicted by the seller in a given month, and at the same time may not be lower than PLN 200,000.

Important information for taxpayers dealing with trade in this type of goods is that the list of entities that have submitted a security deposit is kept in electronic form by the minister responsible for public finance. Moreover, the list itself is made available in the Public Information Bulletin. The information contained in the list allows buyers to assess whether transactions with a given supplier may be subject to a risk of joint and several liability.

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How is the entry in the above-mentioned list? After the payment is made by the taxpayer, the head of the tax office is obliged to enter the seller's data immediately into the records, but not later than the next working day after the decision on accepting the guarantee deposit is issued. The following data are entered into the list:

  • names and surname or name of the person delivering the goods,
  • the number by which it is identified for tax purposes,
  • the amount of the deposit.

The deposit may be submitted for an indefinite period or with a specified expiry date, but it cannot be shorter than 12 calendar months.

Guarantee deposit - in what form?

In the VAT Act, the legislator took into account three options for the seller of sensitive goods to submit a guarantee deposit. The available forms include:

  • payment of funds to a separate account of the tax office,
  • bank or insurance guarantee,
  • irrevocable written authorization of the tax authority, which has been confirmed by a bank or a cooperative savings and credit union, for the exclusive disposal, up to the amount of the guarantee deposit, with funds accumulated on an account at this bank or at this cash desk.

Joint and several liability and guarantee deposit - learn more about accounting for sensitive goods.