A taxpayer may lose due to lapse of time
The institution of the statute of limitations is such that no actions increasing or decreasing a tax liability may be taken with respect to the time that has already expired, according to the ruling of the Supreme Administrative Court (II FSK 3642/18), which was described by Rzeczpospolita.
Łukasz Kupryjańczyk, a tax adviser and partner at Thedy & Partners, commented on the ruling in the newspaper, pointing out that despite some systemic injustice in this particular case, one should agree with the analysis of the regulations made by the WSA and then the NSA. The construction of the statute of limitations is such that it works symmetrically in both directions. This may result in a situation in which, on the one hand, the authority will not be able to demand from the taxpayer an increase of the tax liability for specific tax years, but, on the other hand, the taxpayer – as a rule – will not be able to make corrections from which he could demand e.g. a tax refund for this period. This rule is superimposed on the rules regarding the moments of recognising revenue and deductible costs in income tax. If these prescribe the recognition of a given revenue or cost item in the period covered by the statute of limitations, the taxpayer will no longer make any changes. In the situation under analysis, this rule works to the disadvantage of the taxpayer and causes – as he puts it – a certain trap. Unfortunately, a different interpretation of the regulations in this respect would be – according to Łukasz Kupryjańczyk – inappropriate.
As regards the substantive issue raised in the case, concerning the moment of recognising the cost, it may also be controversial, although the interpretation made by WSA and NSA in turn – according to Łukasz Kupryjańczyk – is justified. Although the additional tax liability and its value were determined after the statute of limitations, the tax receivable itself concerned the old period and the moment when the cost was incurred did not change. The amount changed as a result of the decision received, but it seems reasonable that it should be allocated to the historical moment when the original tax liability arose. The limitation period appears to be rather long, but when added to the possible time limits for hearing cases in the courts, it unfortunately proved to be insufficient in this case and resulted in the “trap” referred to by the taxpayer and a kind of “systemic injustice”.
The entire article was published in Rzeczpospolita of 7 July 2021, page H7