Liability martyrdom
10.05.2011Company: Amcham
A VAT Act amendment has been effective sinc e 1 April 2011. We call it “April” but what has made it famous above all was that it brings the liability of a taxpayer for the tax obligation of a performance provider.
When discussing the amendment in a series of approval processes, not only in the Parliament, the proposers stressed that the concept of liability was arriving primarily in the interest of eliminating some specific tax evasion schemes (so-called carousel, or rather carnie frauds) and that the liability would be used exceptionally.
Well, this sounds like painting a pretty picture…
Exactly on 1 April 2011 a press release of the General Financial Directorate was issued, emphasising, among other things, that unconscious negligence of a recipient would be enough in order to claim the liability for unpaid VAT. In other words, it will suffice that a recipient did not know of the contractor's aim to evade tax but, considering his position, he should have or could have known. And that the tax administration is going to profusely use this concept.
And, unfortunately, one cannot rely on it being an April Fool.
Taxpayers accepting performance from not quite reliably verified contractors then find themselves in rather considerable risk. It is an unpleasant risk, yet , unavoidable. The only way to prevent it is to use the option of special security. This is actually nothing other than a preliminary payment of tax for the provider. Although the impact on a taxpayer’s cash flow may be strong, we recommend considering this procedure, at least with major transactions.
The state will ensure its tax revenues, but this will deprive many taxpayers of a calm sleep.
Daniel Kovačovič, TAX Consultant
Mobile: +420 739 182 283
E-mail: daniel.kovacovic@tacoma.eu
