Interest on tax arrears and lower interest rates

Service-Tax

Entrepreneurs regulate their tax obligations, but not always in full and not always on time. There are times when full sale on time is not disclosed. Otherwise, the taxpayer deducts the incorrect amount of VAT. The result of the above events is the obligation to correct the VAT declaration by correcting the incorrect amount of the previously declared VAT. Some adjustments to the VAT declaration will be made by the entrepreneur with greater or lesser delay, which in some cases generates interest on tax arrears. However, also in this case, the legislator established certain preferences.

Interest on tax arrears at reduced rates

The legislator applied a lower interest rate on tax arrears to taxpayers:

  • for tax debt arising before January 1, 2016 in the amount of 6%,

  • for the tax debt arising after January 1, 2016 in the amount of 4%.

Interest on tax arrears conditions for taking advantage of the reduced rates

In the case of tax debts arising after January 1, 2016, you can take advantage of the reduced 4% interest, provided that:

  • submit a legally effective correction of the declaration within 6 months from the date of expiry of the deadline for submitting the declaration,

  • payment of the entire tax arrears with interest within 7 days, starting from the date of submission of the correction.

On the other hand, in the case of tax debts arising before January 1, 2016, you can take advantage of the reduced 6% interest, provided that:

  • submission of a legally effective correction of the declaration,

  • payment of the entire tax arrears with interest within 7 days, starting from the date of submission of the correction.

On the other hand, it is not possible to apply reduced interest rates, both 4% and 6%, if the taxpayer corrects the declaration after receiving the notice of initiating a fiscal inspection or during an inspection or verification activities, or after completion of a tax inspection.

Old debt versus new reduced 4% interest rate

For a moment, i.e. in the period from January 1, 2016 to June 30, 2016, it was possible to use the reduced 4% rate for interest on tax arrears arising before January 1, 2016. It was necessary to meet the above-mentioned conditions, i.e. submit a correction of the tax return and pay the tax arrears with interest within 7 days from the date of submitting the correction of the declaration in the period from January 1, 2016 to June 30, 2016.

If someone did not use this privilege and submitted or submits a correction of the declaration after June 30, 2016, then he will be able to take advantage of the reduced interest, but in the amount applicable to tax arrears arising before January 1, 2016, i.e. 6%.

Position of the Ministry of Finance in the individual interpretation of the Director of the Tax Chamber in Warsaw of June 27, 2016, ref. No. IPPP2 / 4518-1 / 16-2 / AO.

Watch out for the reasons for the correction

For the arrears arising before and after 1 January 2016, the legislator decided that the taxpayer who corrects the declaration himself will no longer be required to provide reasons justifying the submission of a given correction.

Example 1.

The entrepreneur submitted a monthly VAT-7 declaration for the period 07/2017 on August 17, 2017. The deadline for its submission and payment of VAT is August 25, 2017. The entrepreneur incorrectly included the sales volume subject to 23% VAT in this declaration. If he submits a correction to this declaration by February 26, 2018, he will be able to benefit from reduced interest on tax arrears in the amount of 4%.

Example 2.

The entrepreneur has a tax arrears still from 2015. He did not manage to make a correction in the period from 01/01/2016 to 30/06/2016. Finally, the correction of the declaration with the payment was submitted on 07/13/2017, in this situation in relation to his tax arrears the entrepreneur will be able to apply reduced interest in the amount of 6%.

Example 3.

On July 12, 2017, the entrepreneur submitted a quarterly VAT-7K declaration for the second quarter of 2017 with the simultaneous payment of VAT. The deadline for its submission and payment of VAT is July 25, 2017. In this declaration, the entrepreneur incorrectly deducted VAT, therefore there was a tax arrears in the amount of PLN 15,000. If the entrepreneur corrects the declaration and pays the tax arrears with interest in the period:

  1. until January 25, 2018, then he will have the right to benefit from the reduced interest rate of 4%:

- the entrepreneur noticed an error and submitted a correction of the VAT-7K declaration along with the payment of tax with interest on October 31, 2017.

Calculation of reduced interest -> (98 days x PLN 15,000 x 4%) / 365 days = PLN 161

  1. after January 25, 2018, then you will not be entitled to the reduced interest rate of 4%, but only the standard interest rate of 8%:

- the entrepreneur noticed an error and submitted a correction of the VAT-7K declaration along with the payment of tax with interest on 29/09/2017.

Calculation of standard interest -> (66 days x PLN 15,000 x 8%) / 365 days = PLN 217