Distribution of the tax in installments as one of the reliefs in the payment of VAT liabilities

Service-Tax

The Tax Ordinance strictly defines the deadlines within which the tax should be paid. However, the legislator has provided for taxpayers with a number of tax reliefs. The tax authorities have been equipped with competences enabling them to make changes to the tax payment deadline. One of such institutions is the payment of the tax in installments.

The essence of spreading the tax payment into installments

In the case of dividing the tax payment into installments, we deal with the division of the existing tax liability into parts and the setting of specific payment dates for these parts. It can therefore be said that instead of the current payment deadline, several other deadlines are established with the simultaneous division of the benefit into installments.

Pursuant to the provisions of the Tax Ordinance, the tax authority, at the taxpayer's request, in cases justified by the taxpayer's important interest or the public interest, may divide the tax payment into installments. The content of the above-mentioned provisions shows that the tax relief may be granted by way of a decision of the tax authority only upon an application submitted by the taxpayer.

The premise of an important interest of the taxpayer and the public interest

The basic condition for the authority to make a decision to spread the payment into installments is the existence of an important interest of the taxpayer or the public interest. There is no definition of these terms in the act, which consequently means that the determination whether these conditions have been met should be made in a specific case. The taxpayer, when submitting the application for the payment of the tax into installments, should indicate the occurrence of the above premises and provide objective arguments justifying the occurrence of these circumstances.

It is worth remembering that even the fact that the authority recognizes the condition of an important interest of the taxpayer or the public interest does not automatically determine the need to divide the tax into installments. This is due to the freedom of adjudication granted to the authority in this regard. Naturally, the tax authority is obliged to make a thorough assessment of all evidence in the case and only on this basis can it make an appropriate decision.

Distribution of tax in installments - adjudication procedure

Proceedings to spread the tax payment into installments are initiated by the taxpayer, who should submit an appropriate application in this matter. The application should provide arguments indicating the existence of an important interest of the taxpayer or the public interest. In addition, the taxpayer should also propose the dates of payment of individual installments along with their amount. The application initiates proceedings during which the authority checks the facts presented by the taxpayer and makes a decision on the matter.

Even in the case of a decision positive for the taxpayer, the authority may establish other terms of installments than those contained in the application. This is due to the freedom of decision granted and the fact that the tax authority should take into account not only the economic situation of the applicant, but also the budgetary situation.

Incidentally, it should be noted that also in the case of local government taxes collected by the tax office (e.g. inheritance and donation tax), the head of this office may divide the tax into installments. However, this may only take place with the consent of the chairman of the management board of a local government unit. This consent takes the form of an order subject to the complaint. The head of the tax office is bound by the position expressed by the local government unit. Start a free 30-day trial period with no strings attached!

Distribution of tax in installments and legal consequences

The effect of issuing a positive decision to spread the tax into installments is the postponement of the payment deadline. As a result, there is no limitation period in relation to a given tax liability, no tax arrears arise and no interest on arrears can be charged. Only a prolongation fee of 50% of the standard default interest rate is charged.

In the event of failure to meet the payment deadline of any of the installments, the decision on the unpaid installment expires by operation of law. This returns you to the original payment date.

Example 1.

The deadline for payment of the tax in the amount of PLN 5,000 was April 30th. As a result of the submitted application and conducted proceedings, the tax authority spread the tax into 5 installments payable by the 30th day of each month. The taxpayer did not pay the first installment by May 30. This means that in relation to the amount of PLN 1,000, the decision to spread the tax into installments has expired. The date of payment for this amount again became April 30, and from that date late payment interest is calculated.

As of January 1, 2016, a new provision was introduced in terms of the payment of tax in installments, aimed at preventing the notorious non-payment of installments by unreliable taxpayers. Well, in the event of failure to meet the payment deadline of three consecutive installments into which the tax has been spread, the entire decision on spreading into installments expires by operation for all unpaid installments.

Example 2.

The deadline for paying the tax in the amount of PLN 5,000 was April 30th. As a result of the submitted application and conducted proceedings, the tax authority spread the tax into 5 installments payable by the 30th day of each month. The taxpayer did not pay the first three installments due on May 30, June 30 and July 30. This means that in relation to the entire tax, the due date is again April 30th. From that date, the tax authority will charge late payment interest.