Statute of limitations on tax liabilities – benefits and risks

In principle, the tax liability is time-barred after 5 years*, counting from the end of the calendar year in which the tax payment deadline expired.

*A different term applies to tax liabilities arising by issuing a determination decision (e.g. real estate tax or from taxation of revenues not covered by disclosed sources or from undisclosed sources).

Therefore, on 31.12.2026, the statute of limitations will expire for example for:

• personal income tax for 2020
• corporate income tax for 2020 – for companies with a tax year equal to the calendar year
• value added tax – for the period from December 2020 to November 2021, if the taxpayer submitted returns for monthly periods.

Benefits

The statute of limitations on the tax liability means that the tax authority cannot audit the correctness of the submitted tax return for this period, challenge the correctness of the calculation of the tax liability or issue a decision stating the existence of tax arrears.

Disadvantages

The above-mentioned blockade applies to both the tax authorities and the taxpayer, and as a result may have negative consequences for this taxpayer. For example:

Example 1

• The taxpayer learned that he was entitled to benefit from a tax relief in the tax settlement for one specific period, namely the period that was time-barred (e.g. 2019).

Conclusion: The relief is irretrievably lost.

Example 2

• The tax authority controls the CIT settlement of a capital company engaged in the wholesale of goods for 2021.
• The tax-deductible costs of 2021 include invoices for the purchase of goods that were sold by this taxpayer in December 2020. Invoices for the purchase of goods were issued in January 2021, the taxpayer received them in the same month, so they were included in the costs of 2021.

Conclusion A: The costs of purchasing the above-mentioned goods should constitute direct costs for 2020. There is no reason to question the authority’s findings. The taxpayer should correct the CIT tax return for 2020 and include the above-mentioned invoices until the limitation period has expired (until 31.12.2026). At the same time, the tax base for 2021 will be increased (by the value of the above-mentioned invoices).

Conclusion B: Effect of the taxpayer missing the deadline of 31.12.2026: the costs resulting from the above-mentioned invoices will be “forfeited” for income tax purposes, i.e.:

• it will not be possible to revoke the settlement for 2020,
• the authority will remove these invoices from the 2021 settlement, which may lead a tax arrears in CIT.

More examples illustrating the value of verifying periods for which the limitation period is approaching are described here – in our separate article.

Hooks and pitfalls – suspension, interruption of the limitation period for tax liability

The provisions of the Tax Ordinance provide for situations in which the limitation period:

1. it is interrupted because of the occurrence of a specific event (e.g. a declaration of bankruptcy) and then runs again from the day following the day on which the decision to terminate or discontinue the bankruptcy proceedings becomes final;
2. is suspended, this takes place, for example, on the date:

• an appeal to the administrative court is submitted against the decision concerning this tax obligation,

• initiating proceedings in a case of a fiscal crime or fiscal offence of which the taxpayer has been notified, if the suspicion of committing a crime or offence is related to the failure to comply with this obligation.

Attention! Unfortunately, the case described in point (ii) is still used by the tax authorities in an instrumental way. The aim is to initiate proceedings regarding potential fiscal crime or fiscal offence to suspend the limitation period of a specific tax liability.

There were plans to amend this provision to limit the infamous practice of tax authorities. Unfortunately, during the work on the draft amendment, these changes were withdrawn.

Counting time limits and the expiry of the limitation period

When analysing issues related to the statute of limitations, attention should also be paid to the change that came into force on 1.10.2026. It is Article 12 § 5 of the Tax Ordinance, which concerns the method of determining the expiry of time limits.

Until now, it stated that “if the last day of the deadline falls on a Saturday or a public holiday, the last day of the deadline shall be considered the day following the day or days off from work, unless otherwise provided by tax laws”. In this wording, this provision was used, m.in, as a basis for extending a deadline after the expiry of which the obligation is considered time-barred.

However, as of 1.10.2026, the possibility of such an interpretation has been eliminated. It has been clarified that the above regulation applies only to the “deadline for performing an action” (i.e. e.g. to file an appeal, respond to a request from an authority). Currently, therefore, taxpayers and tax authorities must consider that the tax liability may also expire on a Saturday or Sunday. It is worth remembering this, e.g. when planning the day of filing corrections to tax returns at the last possible moment, to do it effectively.

Authors: Agnieszka Czarnecka, Katarzyna Jaromińska

---

Legal provisions governing the issues described in the article: from Articles 68 to 71 of the Tax Ordinance.