Tax debt relief - when is it possible?


Generally speaking, the taxpayer is liable to pay the tax due. However, there may be circumstances in the taxpayer's life that make him unable to pay. One of the solutions that the taxpayer may apply in such a situation is the cancellation of tax arrears.

The nature of the tax arrears write-off

The institution of tax arrears write-off is described in chapter 7a of the Tax Ordinance on tax reliefs. Pursuant to Art. 67a of the Tax Ordinance, the tax authority, at the request of the taxpayer, in cases justified by important interests of the taxpayer or the public interest, may write off tax arrears in whole or in part. It is worth noting in the first place that the redemption may only concern tax arrears. We understand the tax liability unpaid within the period provided for the declaration or established in the tax decisions. The above means that it is not possible to claim the tax remission before its due date.

Example 1.

Mr. Wojciech submitted his PIT-37 tax return for 2017 on February 20, 2018. This declaration shows the amount of tax payable in the amount of PLN 700.00. The payment deadline is 02/05/2018. Due to the difficult financial situation, he is not able to pay the tax and plans to file an application for cancellation of tax arrears. However, he must remember that he may submit such an application only after the payment deadline, i.e. on May 3, 2018 at the earliest.

Cancellation of tax arrears - initiation of the procedure

Furthermore, it should be noted that, as a rule, tax arrears are canceled upon request. This means that the taxpayer's initiative is required to initiate proceedings in this matter. However, the Act provides for situations where the authority may cancel tax arrears ex officio. Art. 67d of the Tax Ordinance provides for the following cases:

  • there is a reasonable assumption that the enforcement proceedings will not obtain an amount exceeding the enforcement expenses;

  • the amount of tax arrears does not exceed five times the cost of the reminder in enforcement proceedings;

  • the amount of tax arrears was not satisfied in the completed or discontinued liquidation or bankruptcy proceedings or the court dismissed the bankruptcy petition;

  • the taxpayer died without leaving any property or left movable property that is not subject to enforcement under separate regulations or left everyday household items, the total value of which does not exceed PLN 5,000 and at the same time there are no heirs other than the State Treasury or local government unit and there is no possibility of ruling on liability tax third party.

The occurrence of any of the above the sent, however, does not oblige the authority to cancel the arrears. The authority has a decision-making slack in this respect and it is up to it to make the final decision whether to write off the arrears. The purpose of the above regulation is to remove insignificant arrears or those that do not give a chance for effective enforcement.The procedure initiated ex officio is also characterized by a significant simplification of the procedure, as no decision to initiate such a procedure is issued, and the decision canceling the tax arrears is not delivered to the taxpayer, it is left in the case files.

Example 2.

Mrs. Rozalia had arrears in personal income tax. In 2016, she died, leaving no assets and no heirs. The tax authority decided to cancel her arrears ex officio. Without issuing a decision, he initiated proceedings in this case, and then issued a decision which he left in the case files.

Grounds for cancellation of arrears

The provision on the write-off of tax arrears stipulates in its wording that such write-off may take place only in cases justified by an important interest of the taxpayer or the public interest. An important interest of the taxpayer should be understood as situations where, due to extraordinary, random cases, the taxpayer is unable to settle the tax arrears. On the other hand, the public interest is a situation where the payment of arrears makes it necessary for the taxpayer to resort to state aid, as he is unable to meet his material needs.

Taxpayers must remember that poor financial situation and temporary difficulties in maintaining cash liquidity do not constitute an automatic basis for writing off tax arrears. The condition of the important interest of the taxpayer applies to random and exceptional cases (e.g. loss of all property as a result of a fire). Start a free 30-day trial period with no strings attached!

Decision on the cancellation of tax arrears

Cancellation of tax arrears takes the form of a decision of the tax authority. However, you should be aware that the issuance of a decision is discretionary, which means that the authority has discretion in making a decision in this matter. Therefore, even in the event of establishing the premises of an important interest of the taxpayer or the public interest, the authority is not obliged to write off tax arrears.

A special procedure for writing off tax arrears is provided for tax arrears constituting the income of local government units, which are collected by heads of tax offices (tax on civil law transactions, tax on inheritance and donations, tax card). Well, in terms of these taxes, the redemption is decided by the head of the tax office, but he cannot do it without the consent or application of the competent commune head, mayor or city president. The application or consent is issued in the form of a decision that cannot be appealed against.

Example 3.

Ms Beata acquired the inheritance and was therefore liable to pay inheritance and donation tax. Due to the difficult financial situation, after the payment deadline, she asked the head of the tax office to cancel the tax arrears. The governor asked the competent commune administrator to take a position. The commune head did not consent to the redemption of arrears, therefore the head of the office issued a decision refusing to redeem it.