Interest for late tax arrears - when is it not charged?

Service-Tax

In the event of untimely fulfillment of a tax obligation, a specific tax consequence arises in the form of tax arrears. It is objective and independent of the will of the taxpayer. The occurrence of tax arrears has certain consequences, mainly in the form of charging interest for late payment from the day following the due date. The provisions of the Tax Ordinance, however, provide for a number of circumstances when interest for late payment of tax arrears cannot be charged by the tax authority.

Default interest on tax arrears and the period and amount of security

In the first place, it is pointed out that interest for delay in tax arrears is not charged for the period of the security, on the secured amount of liability, if the secured funds, including amounts obtained from the sale of secured goods or rights, have been set off against tax arrears. Therefore, if the cash has been provided to the tax authority as security and was used to pay the arrears, no default interest is charged for the period of security.

Example 1.

The amount of tax arrears has been secured for the value of PLN 100,000 and has been included in the tax arrears of PLN 400,000. The basis for calculating late payment interest is therefore PLN 300,000.

Transfer of case files between tax authorities

The tax authority receiving the appeal shall forward them together with the case files to the appeal body without undue delay, but not later than within 14 days from the date of receipt of the appeal. The provision of the Tax Ordinance states that interest for late payment of tax arrears shall not be charged for the period from the day following the expiry of that period until the date of receipt of the appeal by the appeal body.

Example 2.

On July 25, the deadline for submitting the appeal to the appeal body expired. The tax authority handed over the appeal only on September 25. No late payment interest is due for the period from July 26 to September 25.

Case on appeal

Pursuant to the provisions of the Act, the case in appeal proceedings should be settled no later than within 2 months from the date of receipt of the appeal by the appeal body, and the case in which the hearing was held or the party submitted an application for a hearing - not later than within 3 months. Late payment interest shall not be charged from the expiry of the indicated time limits to the date of issuing the decision by the appeal body. Importantly, this rule does not apply if a party or its representative contributed to the delay in issuing the decision or if the delay was caused by reasons beyond the control of the authority.

Example 3.

By January 25, the appeal body should settle the case of the taxpayer who appealed against the decision of the tax office. On this day, 2 months elapsed from the date of receipt of the appeal by the appeal body. The decision was finally delivered on June 25. No interest is charged for the period from January 26 to June 25.

Suspension of the proceedings ex officio

If the proceedings are suspended ex officio, no default interest shall be charged from the date of the decision to suspend the proceedings to the date of delivery of the decision to resume the proceedings.

Example 4.

On June 15, a decision to suspend the proceedings was issued ex officio. It wasn't delivered until 2 months later. Interest for late payment of tax arrears does not apply from June 15. On October 17, a proceeding to resume the suspended proceeding was issued, which was then delivered on October 24. From September 25, late payment interest is charged again.

Little interest

Pursuant to the provisions of the Act, the authority does not charge late payment interest if the amount would not exceed three times the value of the fee charged by the designated operator within the meaning of the Act of 23 November 2012 - Postal Law for treating a letter-post item as a registered item.

Example 5.

The value of the tax arrears is PLN 7. The tax authority did not charge the taxpayer with interest, as the minimum interest rate for late payment was PLN 8.70.

Failure to deliver a decision

Another case is that default interest is not charged for the period from the date of initiation of tax proceedings to the date of delivery of the decision of the first instance authority, if the decision was not delivered within 3 months from the date of initiation of the proceedings.

Example 6.

The tax proceedings were initiated by the first instance authority on May 15, while the tax decision was delivered to the taxpayer on November 15. No late payment interest is due for the entire period up to the date of delivery of the tax decision.

Committing a calculation error in declarations

In the case of arrears related to accounting errors or obvious errors made in the declaration, no interest shall be charged for the period from the day following the lapse of two years from the date of submission of the declaration.

Example 7.

The taxpayer submitted a VAT-7 declaration on July 10, 2014, in which he mistakenly indicated the tax amount of PLN 1,000, instead of PLN 10,000. The tax authority detected the error only in 2017. In such a case, late payment interest is charged from July 11, 2014 to July 10, 2016.