The Supreme Administrative Court issued an important ruling on documenting tax costs.
The background was as follows: during the a audit, the company did not submit any source documents confirming the incurrence of tax costs indicated in the declaration.
The company stated that the inability to present the documents was the result of a fire at the company’s premises. However, the authority determined that the company took steps to restore the documentation only at the stage of the tax proceedings. The company was able to present only single documents, e.g. bank account statements.
The tax authorities did not recognize the presented evidence and arguments, determining the tax liability without taking these costs into account.
This position was upheld by the District Administrative Court in Łódź. The court of first instance indicated that it was the company’s responsibility to immediately restore the destroyed documentation. Therefore, the company should have taken steps to restore this documentation immediately after the event.
The company filed a cassation appeal against this judgment, but the Supreme Administrative Court did not allow it.
The Supreme Administrative Court – similarly to the District Administrative Court – decided that it was the company that was under the obligation to immediately restore the source documentation. Further, it was indicated that the taxpayer may, in some exceptional situations, ask the authority for assistance in recovering tax documentation. Nevertheless, according to the Supreme Administrative Court, it must first reliably prove that it has taken all possible steps to recreate it. For example, he should prove that he asked contractors to send documentation regarding transactions that were undertaken with them and received a refusal for some reason.
The Supreme Administrative Court emphasized that under no circumstances is the authority obliged to find tax documents confirming the given transactions (in order to prove that it is possible to classify a given expense as tax deductible costs).
Judgment of the Supreme Administrative Court of 17th January 2023, file ref. act II FSK 1281/20.