Tax proceedings

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: 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: 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: 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

Usually, it is the audit activities that cause stress and concern in taxpayers – there is never complete certainty that the authority will not undermine tax settlements, determine tax arrears, or impose penal fiscal sanctions. However, taxpayers may be equally discomfortable with proceedings conducted by tax authorities, which seemingly should be less problematic and time-consuming. We are talking about proceedings initiated by the taxpayers themselves, i.e. proceedings to obtain an individual tax ruling or in the case of tax overpayments. Practice shows that the authorities are reaching for various ways to avoid deciding on the merits of the taxpayer’s application at all or to postpone this moment as far as possible. Our experience shows that protractedness applies in particular to proceedings in the following cases: When filing an application in the above cases, taxpayers often have to be very patient, and at the same time plan their processes and costs in such a way as to take into account possible delays in settling the case and the need to prepare responses to subsequent (sometimes quite numerous) requests from the tax authorities. And what is important, this does not always apply to cases where the submitted application actually contains deficiencies or ambiguities (because, for obvious reasons, these should be supplemented and clarified). In this article, we will take a closer look at the so-called interpretation proceedings. We will comment on different cases and types of the proceeding in the future, in subsequent parts of this thread. Interpretation proceedings – practices of the Director of the National Tax Information When submitting an application for an individual tax ruling, the applicant must ensure that the subject of the application, i.e. the factual state or future event, is precisely described (the obtained decision protects the taxpayer / the applicant only if it is consistent with the actual course of the transaction/event). If, when examining the application, the tax authority finds that it lacks important information necessary to issue an interpretation, it should indicate it and call on the applicant to supplement it. In such a situation, the statutory 3-month deadline for issuing an interpretation is extended by the time provided for the applicant’s response. It may seem like no big deal, but it should be remembered that the issued tax ruling gives the recipient legal protection only from the moment of its receipt/delivery (provided that it is issued within the statutory deadline) and with regard to the tax consequences of events that occurred after that date. So let’s imagine this situation: a taxpayer plans to sell a real estate complex and wants to obtain confirmation as to whether and how such a transaction should be taxed with VAT or CLTT (civil law transaction tax). The sale is scheduled for 4 months, so the taxpayer sits down to write the application, hoping that he will receive a response no later than 3 months after its submission. In such a case, any extension of the interpretation proceedings may mean that either the interpretation will be issued after the sale has been made, without giving the applicant full protection resulting from it, or in order to obtain such protection, the taxpayer will be forced to postpone the transaction already planned. Proper preparation of the content of the application for an individual tax ruling is therefore very important. Unfortunately, practice shows that even a complete and accurate application does not guarantee a decision within 3 months. It happens that the Director of the National Tax Information Service calls for supplementing the application by indicating: Such summonses are often aimed at gaining time to issue a substantive decision or to lead to a situation in which it will not be necessary at all – failure to respond to the summons within the set deadline may leave the taxpayer’s application unexamined. Sometimes it seems that as part of the request to supplement the application, the authority actually requires the submission of certain statements, its own assessments within the framework of the described facts/future event, which shifts the responsibility for this assessment to the applicant, while leaving greater freedom and decision-making power to the tax authorities that may conduct tax and customs fiscal audits at the taxpayer in the future. In such a situation, it is sufficient for the tax officer/auditor to assess the nature of the activity carried out by him, differently from the taxpayer (in the content of the application), as e.g. not constituting research and development activities, and the taxpayer will be deprived of the protection resulting from compliance with the individual tax ruling received. We will not judge the reasons for such an action of the Director of the National Tax Information. Is it due to the high workload of the authority, too superficial reading of the application by the official, or from a lack of decision as to how to deal with the matter and the desire to “buy” additional time to develop a solution. Nevertheless, there is one moral for taxpayers, simple procedures may not lead to the expected results if the application is not prepared with awareness of the tricks used by the authorities. Summary Obtaining an individual tax ruling can bring many benefits. However, in order to receive it well in advance and ensure maximum protection against possible negative tax consequences, you should take care in particular of: In all of the above aspects, the help of an experienced tax advisor is invaluable – and we offer you such support. Authors: Katarzyna Jaromińska / Agnieszka Czarnecka