Reading time: 5 minutes.
In the article you will learn:
- How long the tax proceedings should take;
- The reason for initiating tax proceedings by the tax office;
- How the taxable person can speed up the examination of the case by the tax authorities.
Tax Supervisor at RSM Poland
In one of the episodes of our series “Courts on the side of taxable persons, i.e. an overview of true stories” we wrote about the instrumental initiation of criminal and fiscal proceedings by tax authorities. Such proceedings are used by the tax office to prevent tax liabilities becoming time-barred. Today we will go to the root of the problem, i.e. we will tell you why the tax authorities must prevent statute of limitations in this way at all. Here are a few words about delaying tax cases.
What do the regulations say about the duration of a tax audit?
It would seem that neither tax audit nor its consequences – i.e. tax proceedings – can last indefinitely. There is no denying that the activities carried out by the tax office are of a significant inconvenience to the taxable person and are associated with high costs, both regarding finance and (or perhaps above all) time. A person audited by the tax authorities has to respond to calls, provide explanations, and send an often large number of documents. One cannot forget about the stress that is caused on the occasion – even to a taxable person whose settlements are absolutely impeccable.
Therefore, the duration of both tax audits and tax proceedings are regulated by law – in the Enterprises Act and the Tax Ordinance.
Pursuant to the provisions of the Enterprises Act, the duration of all inspections in one year may not exceed a specific number of days. Depending on the size of the enterprise, this is the period of:
There are, however, exceptions to this rule – for example, regarding tax inspections prior to VAT refund.
How long can tax proceedings last according to the Tax Ordinance?
In the case of tax proceedings, the regulations stipulate that the tax office should deal with matters requiring evidence proceedings without undue delay, not later than within a month.
If the matter is particularly complex, the tax authority is given a little more time. In this case, the activities should be completed no later than within 2 months from the date of initiation of the proceedings. So it would seem that they shouldn’t last long.
Is it possible to extend the duration of the tax audit and tax proceedings?
Unfortunately, it is – the tax audit carried out, for example, in the field of VAT refund, and each tax proceedings can be extended almost indefinitely. The tax authority only has to notify the taxable person about it, setting a new date for settling the matter each time. However, the new date is not final and may also be extended. It is a particularly common practice in the case of tax proceedings – therefore, some of them last even for years.
What are tax proceedings and why do they take so long?
Tax proceedings are often the result of a tax audit. If, in the course of the audit, the tax office identified any irregularities, it describes them in the report. Then, in the event that the taxable person does not agree with the findings of the tax office and does not submit an amended return and does not pay the tax, tax proceedings are initiated.
Tax proceedings end with a decision in which the tax authority determines the amount of the tax liability it deems correct. In the course of tax proceedings, the tax office assesses the evidence collected in the course of the tax audit, and if necessary, collects new evidence and often also interrogates witnesses.
Does the tax office really need several years to decide whether our settlement is correct?
No. If the tax proceeding take so long, it may mean that the tax office is prolonging them without justification. Recently, we had such a case at RSM Poland.
At the request of one of the clients, we reviewed the files of the case that was heading towards the end. These were tax proceedings, and the notification had been issued pursuant to Art. 200 of the Tax Ordinance. It turned out that the tax proceedings consisted mostly only in sending to the taxable person subsequent decisions on setting a new deadline for settling the matter. This went on… for four years. Throughout this time, the tax office did not take any actual steps to finalise the case, and the taxable person was waiting for the result of the actually ignored proceedings.
In tax proceedings that last several years, sooner or later the limitation of liabilities begins to loom over the tax authority. If that happens, it becomes necessary to discontinue the case.
Therefore, such a long time of considering the case is one of the reasons why the tax authorities initiate criminal and fiscal proceedings. Fortunately, administrative courts increasingly recognise them as artificial and intended only to suspend the limitation period, and thus to allow the tax office to complete the tax proceedings.
Does the taxable person have to wait patiently for the end of a case where nothing is happening?
Again, the answer is no. In an artificially prolonged case, the legislator has equipped the taxable person with several tools that can be used to accelerate the completion of the process.
They include a reminder and a complaint about inactivity or excessive length of proceedings. Of course, these letters must be reasoned. If the taxable person’s arguments are accepted by the tax authority of the second instance or the provincial administrative court, the case will be completed – this time swiftly.
So if you have the impression that the case conducted by the tax authorities takes longer than it should, it is worth going to the tax office and checking the files. If the tax proceedings are protracted or the tax authority remains inactive, measures can be taken to finalise the case faster. Our experienced experts will be happy to support you in the field of tax advisory.