Introduction

A tax obligation is an unspecified obligation, arising from tax acts, such as the CIT/VAT Act, the Inheritance and Donation Tax Act, the Tax on Civil Law Actions and many others, to make a compulsory monetary payment in connection with the occurrence of events specified in these acts. By imposing such an obligation on the taxpayer, a tax liability arises, regulated by the provision of art. 5 of the Tax ordinance, which is an obligation of the taxpayer resulting from the tax obligation to pay the tax in the amount, at the time and place specified in the provisions of the tax law in favour of the State Treasury, voivodship, poviat or commune. The taxpayer defined in this act is natural and legal persons, organisational units without legal personality and other entities specified in tax acts as taxpayers, who are liable with all their property for the resulting tax obligations. The ways in which such liability arises, i.e. situations in which a taxpayer becomes obliged to make such a payment, are to be found in Article 21 of the Ordinance. In a situation when a taxpayer fails to fulfil such an obligation – payment of tax – he will be charged interest for delay.

Statute of limitations

Despite the fact that a taxpayer is obliged from above to fulfil a tax obligation, such tax obligation becomes statute-barred if five years have passed from the end of the calendar year in which the deadline for payment of tax expired. This means that such a liability, despite the fact that it is unpaid, expires together with interest accrued for late payment, thereby blocking the possibility for its creditor to enforce the fulfilment of this tax liability. Even if the taxpayer, after the expiry of 5 years, wishes to voluntarily pay the outstanding amount, he will not be able to do so due to the fact that it will be treated as an overpayment, which is automatically subject to refund.

In the verdict P 30/11 of July 17, 2012, the Constitutional Tribunal pointed out that the institution of the statute of limitations of tax liabilities serves at the same time to realise two constitutional values, i.e. the necessity to maintain budgetary balance and stabilisation of social relations through expiration of overdue tax liabilities. The task of the legislator was to determine the appropriate period of the statute of limitations so that it was not too short, which would make it impossible to ensure tax justice and the universality principle, and so that the period was not too long, which could be understood as creating an ostensible institution of the statute of limitations. The legislator’s aim was to set the time limit in such a way that the entity liable to pay taxes would not perceive the statute of limitations as a period that it could wait in order to avoid paying the tax.

Suspension of the period of limitation

The subject of the limitation period of a tax liability may also be suspended and it will be further discussed herein pursuant to art. 70 § 6.1 op. which provides that the course of the limitation period of a tax liability does not begin, and a begun period is suspended, with the date of commencement of proceedings in the matter of a fiscal offence or fiscal transgression of which the taxpayer was notified, if the suspicion of an offence or transgression is connected with failure to fulfil this liability. Seemingly, the provision seems to be a simple arrangement of the legislator, however, it is commonly used by tax authorities to instrumentally initiate penal fiscal proceedings just before the expiry of the limitation period, with the sole purpose of suspending it. Tax authorities use this practice in order to gain time in verifying tax settlements of a taxpayer. The tax authorities, taking advantage of the taxpayers’ legal ignorance, consider the commencement of proceedings in the case itself to be the day on which the limitation period is suspended, while the key point in this case is that the correct date for the suspension of the limitation period is the commencement of proceedings against a person, i.e. when the decision on the presentation of charges is announced/issued.

The Ombudsman has long asked the Constitutional Tribunal the question (II.511.942.2019) in the case (K 31/14) whether the provision of Article 70 § 6(1) op., is consistent with the Constitution, providing for the running of the period of suspension of liability from the date of initiation of proceedings in rem and not ad personam. In view of the fact that the taxpayer does not have to be notified of the very fact of commencement of proceedings in the case, and the proceedings themselves, which do not have to transform into proceedings against a specific person, such suspension should not take place. The limitation period should be counted from the day following the day on which the proceedings in the fiscal offence case are finally concluded, if only because it would be illogical to count the suspension of this period without even having a specified amount of the unfulfilled liability to which the initiated proceedings themselves are related.

The Supreme Administrative Court in its judgment of 23 June 2017 I FSK 329/17 held that “In order to suspend the running of the limitation period of a tax liability, it is important to initiate proceedings for a fiscal offence or fiscal misdemeanour, of which the taxpayer was notified. On the other hand, the manner in which these proceedings were concluded is not important for determining whether the effective suspension of the running of the limitation period occurred“. As we can see, according to NSA, the key to recognising the course of the suspension period is the notification of the taxpayer about the commencement of proceedings in the case and not against a specific person.

Unfortunately, pursuant to Article 225 of the Code of Civil Procedure in conjunction with Article 36 of the Act on the organisation and procedure of proceedings before the Constitutional Tribunal, the Constitutional Tribunal decided to reopen the hearing, which had already been closed in this respect, and to postpone it without setting a date, therefore leaving the question of the Ombudsman unanswered.

What does the tax authorities do?

This type of behaviour of tax authorities is quite common and, consequently, the question arises among taxpayers as to what to do in a situation when, in the taxpayer’s opinion, the authority has definitely abused its powers and, by playing for time, exposes the taxpayer to unnecessary stress related to penal-fiscal proceedings. The practice of tax authorities indicates instrumentalization of their powers and the very fact that the initiation of preparatory proceedings is based on the provisions of law shows that the legitimacy of the actions of tax authorities, as financial bodies of preparatory proceedings, is nevertheless of an evaluative nature, which has been repeatedly pointed out by administrative courts, including the Supreme Administrative Court. Accordingly, it should be recognised that the decision to initiate pre-trial proceedings should be supported by an analysis of the information collected by the authority. The aim of criminal proceedings is to detect and punish the perpetrator, and in this case, the initiation of penal-fiscal proceedings becomes only a pretext to gain more time for checking the taxpayer’s documents, which is the suspension of the tax liability limitation period. Such behaviour of the tax authorities leads to the recognition of criminal proceedings as a tool to circumvent the limitation period of the taxpayer’s tax liability, abstracting from the fact that the taxpayer, supporting here Article 302 of the Code of Criminal Procedure with reference to pre-trial proceedings, is not granted any procedural guarantees.

Review by the Courts

As noted above, the taxpayer has no procedural guarantees in connection with the penal-fiscal proceedings conducted against him suspending the running of the limitation period of the tax liability, however, it should be remembered that despite the fact that administrative courts do not control the above proceedings conducted by the tax office, the correctness of the application of Article 70 par. 6(1) of the VAT Act, they may verify the correctness of the authority’s application of art. 70 par. 6(1) of the VAT Act, if only in order to check whether there has been any abuse on the part of the authority.

This position was also confirmed by the NSA in its resolution of 30 July 2020. I FSK 128/20, holding that ”an administrative court may control whether Article 70 § 6.1 of the VAT Act was not abused due to all circumstances of a tax case, and in particular in a situation where the use of this provision is connected with a breach of the principle of trust in tax authorities (Article 121 of this Act) or the principle of legitimate expectations derived from EU law and Article 2 of the Constitution of the Republic of Poland”.

The position of the NSA was sustained and emphatically stated in the resolution of 7 judges of the NSA of 24 May 2021. I FPS 1/21, which positively considered the issue whether in the light of art. 1 of the Act of 25 July 2002. Law on the system of administrative courts and Articles 1-3 and 134 § 1 of the Administrative Court Code, assessment of premises for the application of Article 70 § 6 point 1 in conjunction with Article 70c of the Tax Code by tax authorities when issuing a tax decision falls within the scope of the case for judicial review of the legality of this decision.

Conclusion

In view of the above, if a taxpayer has suspicions as to whether Article 70 § 6 point 1 of the Tax Code was applied to him, it is worth deciding to fight for such rights and take the case to court in order to check the legitimacy of the tax authority’s reference to this provision. Unfortunately, there is no other way to settle the matter with the authority, due to the fact that the provisions of the Code of Administrative Procedure do not provide for tax authorities to be bound by judgments of the Supreme Administrative Court. An important aspect, therefore, will be a well-written complaint to the Voivodship Administrative Court and especially a cassation complaint to the Supreme Administrative Court, in which it will be possible to refer to the above-mentioned resolutions and judgments of the Supreme Administrative Court in verifying the legitimacy of a complaint against a tax authority.