In the previous article (part 1 of the thread) we described the problems faced by taxpayers applying for individual tax rulings – prolonging the proceedings by subsequent calls to supplement the application, attempts to leave the application unexamined. Unfortunately, these practices are also used in other types of proceedings conducted by tax authorities. In which cases do they occur most often, what do they consist of and how can they make life difficult for taxpayers? And most importantly – how to counteract them?
Recently, we have mentioned that our experience shows that protractedness applies in particular to proceedings in the following cases:
- issuing individual tax rulings (which we described here),
- tax refund, especially withholding tax (WHT),
- confirmation and refund of the overpayment (in different taxes, a lot depends on which office the application is addressed to).
In this article, we will deal with proceedings in which taxpayers or remitters apply for a refund of overpaid tax (i.e. overpaid (unduly paid) tax receivables). We expect the thread to continue in the future…
Delays / extensive duration in tax refund or overpayment proceedings
Let’s analyze the topic on the example of proceedings initiated at the request of a taxpayer or remitter for a refund of withholding tax (i.e. WHT, including one paid under the Pay&Refund mechanism) or overpayment in WHT, also in respect of interest for late payment paid with tax, which was finally refunded by the office. This is a very important topic, especially since it often concerns very material amounts. Therefore, any delays in the recovery of overpaid receivables may be very severe for taxpayers (or remitters).
Unfortunately, even in such cases, there are proceedings in which the authorities seem to be looking (sometimes forcibly) ways to avoid issuing a decision granting the applicant a tax refund or overpayment. To this end, among others:
- declare that the applicant is not entitled to be a party to the proceedings , e.g. with regard to applications submitted by foreign taxpayers for the reimbursement of late payment interest paid by them on late payment of WHT, which was subsequently refunded;
- they consider that there is no legal basis for examining the application – this was the case, for example, in cases in which taxpayers or remitters applied for a refund of interest paid on a late WHT payment, which was finally refunded in the Pay&Refund procedure (which, however, was challenged by the Supreme Administrative Court);
- notify a party to the proceedings of the possibility to review the file case before the very end of the statutory deadline for the completion of the proceedings, which means that the authority “must” guarantee the applicant or his attorney 7 days to exercise this right (with the deadline being counted from the date of delivery of the authority’s decision) – i.e., if the decision referred to in the first sentence is issued 4 days before the deadline for the completion of the case, the official “has no choice” and must issue a decision to set a new deadline for the resolution (completion) of the case (usually in the (next) two months);
- call for the application to be supplemented (“at the last minute”, just before the deadline for issuing a decision, while extending the proceedings for another two months), whereby the applicant may be called, for example, to:
- providing further documents – whereby the authorities’ requests are sometimes bizarre, e.g. a request to submit a certificate from a bank confirming that the bank account indicated by the taxpayer for the refund of the overpayment is actually at his disposal (despite the fact that this has already been proved by other evidence, e.g. in the form of confirmations of transfers using this account concerning payments being the subject of the proceedings);
- verification of previously submitted statements and evidence – it happened, for example, before the end of the deadline for issuing a decision on the overpayment, the tax authority asked the applicant to confirm whether the amount stated in the application was definitely the correct amount of the overpayment, because the amount was supposed to be lower in the authority’s system; it would seem that the authority’s question was correct, but it should be added that: (a) in the course of the proceedings, detailed information confirming the amount of the overpayment was presented, (b) the discrepancies with the data in the system were noticed by the authority only a day before the end of the deadline for issuing a decision, (c) the alleged discrepancy in the amount of the overpayment, which resulted in another postponement of the settlement of the case for another two months, concerned less than 40 Polish grosz (!) in the case of an overpayment of several tens of thousands of zlotys – in such a state of affairs, the rationality, purposefulness and proportionality of the authority’s actions may raise reasonable doubts.
The above situations may apply in particular to those proceedings the subject of which are more complex cases or legal issues in which an unambiguous line of case law has not yet been formed. The authorities then look for new ways to discourage the applicant from further struggle under the guise of a thorough investigation of the case or to postpone the moment when they will have to issue a substantive decision.
Summary
Practice shows that the actions of tax authorities can often surprise. And although you can come across an official who will approach the matter and substantive analysis in a friendly and “humane” way (because we are lucky enough to know such cases), unfortunately there is also a considerable risk that – especially in more complicated cases – you will have to face a completely different approach.
That is why the following are so important:
- proper preparation of the content of the application (for tax refund or overpayment – there are two separate modes) and collection of supporting documentation before initiating the proceedings;
- knowledge of procedures, taxpayers’ rights and the powers and obligations of tax authorities;
- the ability to respond appropriately to the actions of tax authorities (including awareness of what can be done to contribute to faster resolution of the case, or when and on what terms to file a reminder or complaint about the protractedness of the proceedings).
Our advisors have extensive experience in all of the above areas. Therefore, if you are planning to file an application initiating an overpayment procedure or you are in the process of such proceedings and you are facing further summonses, protracted proceedings or attempts to reject the application by the tax authorities – we can help.
Authors: Katarzyna Jaromińska / Agnieszka Czarnecka
