VAT is a neutral tax—so the theory goes. An entrepreneur pays VAT on purchases, collects VAT on sales, and settles the difference with the tax office. If they paid more than they collected, they are owed a refund. This is not a benefit. It is not a privilege. It is a structural element of the tax.
The Court of Justice of the European Union has repeated this for years. Poland’s Supreme Administrative Court cites these rulings. The principle of neutrality is the foundation of the VAT system across the entire Union.
And yet Polish practice has gone in a different direction.
Tax authorities treat a VAT refund application as a warning signal. Someone wants their money back? Better check if they’re cheating. Better launch an audit. Better verify their counterparties. Better extend the deadline—once, twice, three times—until the entrepreneur either gives up or goes bankrupt.
The Reversal of Burden
There is something deeply troubling in how the system transfers responsibility.
In theory, it is the tax authorities who should be pursuing fraudsters. They have the powers, the resources, the access to information. They should be verifying supply chains, tracking carousel schemes, identifying criminals.
In practice, this obligation falls on the entrepreneur.
Did you verify your counterparty? Did you verify your counterparty’s counterparty? Did you check where the goods you’re buying come from? Did you confirm that your supplier pays their taxes? Do you have documentation proving you exercised due diligence?
A 2018 report by the Lewiatan Confederation states it plainly: 70% of entrepreneurs consider verification obligations excessive. And more than half say the scope of these obligations has increased dramatically over five years.
Entrepreneurs say: our job is to run a business, not to police other taxpayers.
They are right. The Court of Justice of the EU agrees. In its 2012 Mahagében ruling, the Court held clearly: imposing control obligations on taxpayers under threat of VAT refund denial is the authorities shifting their own duties onto others—in a manner contrary to law.
But rulings are one thing. Practice is another.
The Anatomy of Delay
What does a typical VAT refund case look like?
You file a return showing excess input VAT. The office has sixty days to issue a refund. On the fifty-ninth day, you receive notice that an audit has been initiated. The deadline is extended.
The audit lasts months. They demand documents. They interrogate witnesses. They verify counterparties—yours and theirs. They search for something that will justify denying the refund.
If they find it, they issue a refusal. If they don’t, they keep searching. They extend the audit. They request further explanations. They wait for something to surface.
Meanwhile, your money sits in the Ministry of Finance’s account. Working—but not for you.
The Price You Don’t See
There are companies that did not survive this.
Not because they cheated. Not because they misreported VAT. Because they couldn’t wait.
A company whose refund of several hundred thousand zlotys has been frozen cannot pay its suppliers. Cannot pay its employees. Cannot finance its next orders.
Bankruptcy caused by unlawful withholding of VAT looks in the statistics like any other bankruptcy. No one counts how many jobs were eliminated, how many families affected, how much enterprise wasted—because an official decided to “verify.”
Statutory interest does not compensate for years of uncertainty. A victory after five years does not compensate for a company that ceased to exist in year two.
And the people responsible for these decisions? They face no consequences.
What European Law Says
The Court of Justice of the EU is unequivocal on this matter.
A taxpayer cannot be deprived of the right to deduct VAT merely because their supplier violated regulations. They can lose this right only if the authorities prove—based on objective circumstances—that they knew or should have known of the violation.
The burden of proof rests with the authorities. Not with the taxpayer.
In its December 2022 ruling (C-512/21), the Court further clarified: even when there are grounds for suspecting irregularities, a taxpayer cannot be required to conduct verification as thorough as that performed by the tax authority.
A taxpayer is not a law enforcement agency. They do not have such powers, such resources, such obligations.
Polish practice ignores these rulings. But the rulings exist—and they can be invoked.
What We Do
We represent entrepreneurs whose VAT refunds are being unlawfully withheld. We enter at any stage—from the first deadline extension, through the audit, to court proceedings.
We help build due diligence documentation—not because we consider these requirements just, but because in the current system it is a line of defense.
We appeal refusal decisions. We file complaints against delay. We cite CJEU and Supreme Administrative Court case law—because the law is on the taxpayer’s side, even when practice does not reflect it.
We pursue damages for unlawful actions by authorities. Because if the state withholds your money without legal basis, it should answer for it.
We are not afraid of confrontation. We place the client’s interest above good relations with officials.
In Closing
The VAT you are owed is not a favor from the state. It is your money.
A system that withholds it for months and years, that demands you do a detective’s work, that punishes you for the mistakes of others’ suppliers—this system is flawed. European law confirms it. Case law confirms it.
But law does not enforce itself. Rights must be fought for.
