VAT refunds

What is happening

An exporter claims a refund at the zero rate, and the tax office questions both the supporting documents and whether the suppliers are genuine. The money is needed in the business, and the audit threatens to run for the full period allowed.

A company has bought equipment or completed a building, and its deductions have for once exceeded the output tax. To the tax office this is an unusual return, and requests follow on every supplier and contractor.

After the desk audit the refund is refused because of a 'problem' counterparty two or three links down the chain, of whom the company knew nothing and could not have known.

What the law says

• The refund claim is tested in a desk audit of the return (Articles 88 and 176 of the Tax Code); a desk audit of a VAT return generally lasts up to two months and may be extended to three where there are signs of irregularities.
• During the audit the tax office may request documents supporting the deductions and take measures in respect of counterparties: requesting their documents, interviewing their staff and carrying out inspections.
• The accelerated procedure (Article 176.1 of the Tax Code) allows the refund to be paid before the desk audit ends, for instance against a bank guarantee or a surety; if the refund is later refused, the money must be repaid with interest.
• Entitlement to the zero rate on exports is supported by a set of documents prescribed by the Tax Code, filed within set time limits; the outcome of the audit depends largely on how complete and well drafted that set is.
• The fact that primary documents were signed by an unidentified person is not in itself a ground for refusing a deduction (Article 54.1 of the Tax Code); what matters is whether the transaction was real and who actually performed it.
• The tax office pays interest for late repayment of tax (Article 176 of the Tax Code); a refusal is appealed to the higher tax authority and then to the commercial court.

What we do

• We review the largest deductions before the return is filed: contracts, VAT invoices, primary documents, logistics and supplier information.
• We prepare files on key suppliers showing how they were chosen, what was checked and what proves the supplies were real.
• We reply to requests, draft explanations and prepare staff for interviews.
• We assess whether the accelerated procedure is worthwhile and help prepare the application.
• For exports, we check the document set supporting the zero rate and the deadlines for filing it.
• We prepare objections and an appeal against a refusal and represent the company in the commercial court, including on claims for interest for late repayment.

What we will need from you

• The VAT return for the refund period and the purchase and sales ledgers.
• Contracts, VAT invoices and primary documents for the largest deductions.
• Supplier information: how they were selected, what documents were requested, correspondence.
• Export documents where the zero rate applies: contracts, customs declarations, transport documents.
• Any requests, audit report and decision already received in the desk audit.