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Amendment to default interest rates

Amendment to default interest rates as of 1 January 2016

 

As of 1 January 2016 the Act of 10 September 2015 amending the Tax Ordinance Act and certain other Acts (Journal of Laws of 2015, item 1649) amending the provisions on default interest rates for tax arrears which arose after 1 January 2016 has become effective. The scheme for calculating the standard rate as such is unchanged, that is it equals 200% of the standard Lombard loan interest rate increased by 2 percentage points which means that, at present, it equals 8%. What is indeed changed is the amount of interest rate and conditions of applying the reduced rate, what is more, an increased rate has been introduced. The increase of the interest rate is supposed to encourage the taxpayers to adjust their tax returns on their own, its reduction, on the other hand, is to hinder any possible abuse as regards various crucial issues, such as VAT or excise tax.

Reduced rate equaling 50% of the standard rate

The amount of the reduced interest rate, as specified in Art. 56a of the Tax Ordinance Act, equals 50% of the standard rate which is by now 4%. The application of this rate is only possible in the case of meeting altogether two requirements:

  1. submitting the adjustment of the tax return no later than within 6 months from the day of the expiry of the deadline for submitting the return and:
  2. paying the amount of tax arrears within 7 days from the day of submitting the adjusted return.

The provisions do not admit the possibility of applying the reduced rate in the case when an adjusted tax return was, in a way, forced on a taxpayer, that is. submitted:

  • after a notification of the intention to initiate a tax audit has been delivered (and in the case where the notification shall not apply – after the completion of the tax audit) and
  • as a result of audit activities.

Transitional provisions admit the possibility of applying a tax rate equaling half of the standard rate also to tax arrears which arose before 1 January 2016. Under the condition that the adjustment of the tax return is submitted within 6 months from the day on which the abovementioned Act becomes effective (i.e., from 1 January 2016 to 30 June 2016) and paying the amount of tax arrears within 7 days from the day of submitting the adjustment of the tax return. Failing to meet the abovementioned requirements shall only result in the possibility of application of the reduced tax rate equaling 75% of the standard rate, which was in force until the end of 2015.

Example 1.

The taxpayer incorrectly stated the amounts in the VAT-7 return for October 2015. They adjust the return, and the amount of tax arrears is paid within 7 days counting from the day of the submission of an adjusted tax return. Therefore, depending on the date of the adjustment of the abovementioned return, the reduced rate shall apply on various levels.

  1. Submission of the adjustment of the tax return before 31 December 2015 – the taxpayer shall calculate the default interest in accordance with the reduced rate equaling 75% of the standard rate.
  2. Submission of the adjustment of the tax return from 1 January 2016 to 30 June 2016 – the taxpayer shall calculate the default interest in accordance with the reduced rate equaling 50% of the standard rate.
  3. Submission of the adjustment of the tax return after 30 June 2016 – the taxpayer shall calculate the default interest in accordance with the reduced rate equaling 75% of the standard rate.

Increased rate equaling 150% of the standard rate

The increased rate, as specified in art. 56b of the Tax Ordinance Act, is applicable only as regards tax arrears on goods and services and tax excise. It is calculated as 150% of the standard rate and it equals 12%. It shall apply in the following cases:

a. revealing by a tax authority in the course of tax audit or tax procedure the understatement of the tax return, overstatement of the amount of overpayment or tax refund;

b. submitting the adjustment of the tax return:

  • after the notification of the intention to initiate a tax audit has been delivered (and if the notification shall not apply – after the completion of the tax audit),
  • as a result of audit activities,

- if the amount of the understatement of the tax obligation, overstatement of the amount of overpayment or tax refund exceeds 25% of the amount due and exceeds the fivefold amount of the minimum wage (which is at present PLN 9,250.00);

c. revealing by the tax authority the fact that the taxpayer failed to submit a return (although they were obliged to do it) and the lack of tax payment.

Example 2.

The taxpayer incorrectly stated the amounts in the VAT-7 return. In the course of tax audit or tax procedure the tax authority revealed the understatement of tax obligation, or the adjustment of the tax return was submitted after the notification of the intention to initiate a tax audit has been delivered or as a result of audit activities. The amount of output tax as stated in the return amounted to PLN 30,000.00.

  1. The amount of understatement of the tax obligation was PLN 12,000.00 – the taxpayer shall calculate the interest as 150% of the standard rate [the amount exceeds 25% of the output tax and PLN 9,250.00].
  2. The amount of the understatement of the tax obligation was PLN 6,000.00 – the taxpayer shall calculate the interest as equaling the standard rate [the amount does not exceed neither 25% of the output tax nor PLN 9,250.00]
  3. The amount of the understatement of the tax obligation was PLN 7,800.00 – the taxpayer shall calculate the interest as equaling the standard rate [the amount exceeds 25% of the output tax but does not exceed PLN 9,250.00]

As it was already indicated, the abovementioned regulations are effective since the beginning of this year and are to constitute an encouragement for the taxpayers to review and adjust their tax returns individually.

 

If interested, do not hesitate to contact our expert Piotr LISS:

e-mail: ekspert@rsmpoland.pl

tel. +48 61 8515 766

fax +48 61 8515 786