Have you earned money in the past but failed to disclose it to the tax office? Your liability will likely expire after some time. This will occur due to the statute of limitations, a tax law structure that, on the one hand, relieves the tax authorities but, on the other, can paradoxically be burdensome for taxpayers. Let's examine how the statute of limitations for taxes actually works in Poland.
What is the statute of limitations?
To put it simply, The statute of limitations is a legal institution that provides that after a certain period of time, a right or obligation ceases to exist. In the case of taxes, the statute of limitations usually refers to the obligations incumbent on taxpayers – after its expiry, the tax authorities lose the ability to collect overdue taxes.
From the point of view of the average taxpayer, definitely the most important provision regulating the limitation period for tax liabilities is Article 70 § 1 of the Tax Ordinance. It introduces a basic 5-year period counted from the end of the calendar year in which the payment deadline expired.
In addition, there are several special provisions – Article 68 of the Tax Ordinance gives the tax office three years to deliver a tax assessment decision, Article 80 governs the limitation period for the right to a refund of overpaid tax, and Article 118 of the Tax Ordinance governs the limitation period for third-party liability. However, it is worth drawing one fundamental conclusion – after a few years, tax liabilities generally expire.
How many years is the limitation period for taxes in Poland?
Pursuant to the already mentioned Article 70 § 1 of the Tax Ordinance, the basic limitation period for tax liabilities in Poland is 5 years from the end of the year in which the payment deadline expired. Let's illustrate this with an example:
The situation is similar for CIT taxpayers – the only exceptions being the so-called Estonian CIT and the equalization tax. However, the matter becomes more complicated when the liability concerns VAT, as this is settled monthly or quarterly. Let's use an example again:
Note one more exception to the rule. If the taxpayer failed to disclose income at all, the statute of limitations works differently. The decisive factor is whether the tax authority delivered a decision establishing the tax amount. The tax authority has five years from the end of the year in which the tax liability arose to do so. However, if the authority manages to issue a decision on time, the consequences are extremely severe – we are talking about penalty tax in the amount of 75% of the tax base, as well as any interest.
Statute of limitations for inheritance and gift tax
Inheritance and gift tax is a somewhat interesting case, as its statute of limitations is somewhat different from PIT, CIT, or VAT. This stems from its different nature – it is established by a decision of a tax authority (a determination decision).
Note that in the case of inheritance and gift tax, the taxpayer is obligated to submit the SD-3 form. Once submitted, the tax authority is bound by a three-year deadline from the end of the year in which the tax liability arose – this is regulated by Article 68 of the Tax Ordinance. Once this deadline has passed, the recipient or heir is not required to pay any tax, even if they could calculate it themselves. However, if the same person fails to file a tax return, the statute of limitations will expire after five years, not three.
However, there are fundamental risks that should be noted. representation of taxpayers during tax proceedings We have observed several times how taxpayers tried to justify undocumented income by citing the receipt of an undocumented donation. Pursuant to Article 15, paragraph 4 in conjunction with Article 6, paragraph 4 of the Inheritance and Gift Tax Act, such action results in the imposition of a 20% penalty rate. This is certainly better than the 75% penalty tax on undisclosed income, but it is still a very heavy burden, especially when we are talking about larger amounts, for example, used for purchase of an investment property in Spain or in Italy. A similar punitive tax mechanism was also used in PCC – so it is difficult to justify an undisclosed loan from family or friends.
What is the difference between suspension and interruption of the running of a deadline in tax law?
Our clients sometimes ask us what the difference is between suspending and interrupting the statute of limitations on tax liabilities. The answer is very simple:
- Suspension of the limitation period for tax liabilities it is a kind of pause – time does not run, but after the reason for the suspension ceases, the deadline continues to run, and we do not "lose" the past years or months that make up the limitation period;
- Interruption of the limitation period is, in turn, a literal restart of the deadline – we must again wait 5 years to avoid the obligation to pay tax.
Generally, suspension occurs when the authority issues a decision to defer tax payment or arranges for instalment payment. The suspension lasts until the due date for payment of the tax, arrears, or the last installment due. A regulation by the Minister of Finance extending the tax payment deadline has the same effect. This type of official act was issued, for example, in connection with flood in September 2024.
Suspension of the limitation period for tax liabilities by fiscal penal proceedings
Jako tax office in Warsaw For many years now, we have observed that tax authorities are very willing to initiate fiscal penal proceedings, often solely to suspend the statute of limitations for a liability. Such actions are possible thanks to the unfortunate construction of Article 70 § 6 item 1 of the Tax Ordinance, according to which the statute of limitations is suspended on the date of initiation of proceedings in a case involving a fiscal crime or misdemeanor, if the taxpayer has been notified of this fact and the suspicion of committing the act is related to the failure to fulfill that specific tax obligation.
Courts have repeatedly examined this provision. According to Supreme Administrative Court Resolution I FPS 1/18, the notification of initiation of proceedings may even be very terse. Although in another resolution (I FPS 1/21), the Supreme Administrative Court also emphasized that the court may examine whether the authority initiated proceedings solely to gain more time to conduct its activities, the taxpayer must prove irregularities on the part of the tax authorities. In practice, this requires seeking the assistance of tax law experts – raising the instrumentality objection can be extremely difficult and practically always ends up in an administrative court.
Suspension of the limitation period by a complaint to the Provincial Administrative Court
The limitation period is also suspended when an appeal is filed with the Regional Administrative Court against a decision concerning a given obligation. The limitation period resumes on the day following the date of service of a copy of the court ruling, stating its finality. In practice, the limitation period is suspended for the duration of the court proceedings. This period is often longer than a year.
It's worth adding that an appeal to a second-instance body doesn't have these consequences. This is somewhat counterintuitive, but in principle, it benefits the taxpayer.
As a side note, the suspension of the limitation period is a factor that must be considered when deciding whether to file a complaint with the Provincial Administrative Court. It may turn out that the proceedings were initiated so close to the limitation period that it is more profitable to take the risk of abandoning the appeal in favor of invoking the limitation period. These are extremely rare, but possible, cases. In such situations, it is definitely worth seeking the services of a professional who, based on experience, can assess the realistic chances of success of such a strategy.
Other ways of suspending the limitation period for tax liabilities
Tax authorities have a much wider range of measures at their disposal – the limitation period is also suspended when a dispute arises that is resolved by a common court – it may, for example, concern the validity of a contract, the existence of a legal relationship affecting taxation or the determination of ownership of real estate.
Another reason for suspending the limitation period are decisions related to security – for example, accepting it, ordering its establishment, or proceeding with its enforcement. The same applies to tax avoidance proceedings (GAAR).
Suspension of the limitation period for tax liabilities
As we've already mentioned, interruption is a much more severe consequence, as the statute of limitations begins to run anew. Fortunately, it occurs much less frequently, effectively in two cases:
- When the taxpayer announces bankruptcy
- When the authority applies enforcement measure, e.g. seize funds in a bank account or remuneration, take over receivables, property rights or movable property.
However, for the statute of limitations to be interrupted, the authority must act in accordance with the regulations. However, officials often make mistakes in this matter, which, as taxpayers' representatives, we can exploit to their advantage. It should be noted, however, that the application of enforcement measures by the authority drastically reduces the likelihood of effectively using the statute of limitations.
Does a tax audit interrupt the statute of limitations for tax?
No, and it's worth being aware of this. Neither verification activities nor tax proceedings or audits conducted by any tax authority automatically interrupt or even suspend the limitation period. This can, of course, occur, but only as a result of other actions – for example, the aforementioned initiation of tax criminal proceedings or the seizure of the taxpayer's bank account.
What about mortgages and tax liens?
This is another exception to the rule, and it's worth being aware of it. In the case of tax liabilities secured by a mortgage or lien, the statute of limitations generally does not apply. However, once the statute of limitations expires, the authority can only collect outstanding tax from the security, but not, for example, from the entrepreneur's bank account or receivables.
Practice of tax authorities regarding the limitation period
Many sources claimthat tax authorities are willing to initiate audits (or investigations) shortly before the statute of limitations expires. This is profitable for them for three main reasons:
- In addition to the tax liability itself, there is also interest accrued over the past few years. In the case of arrears from five years ago, this can amount to as much as 60% of the liability's value. On the other hand, it is said that the bonus system in the National Revenue Administration takes into account the amounts of seizures and arrears seized by officials - they are therefore motivated to wait for the interest to accumulate as much as possible.
- The more time has passed since a given event, the more difficult it will be for the taxpayer to defend himself – for example, due to fewer witnesses or lost documents.
- Under the current legal framework, the authority can "buy" itself a little more time if it runs out. This is where the accusation of instrumental use of tax-related criminal proceedings and seizures of entrepreneurs' bank accounts arises.
It's also not uncommon for tax authorities to initiate proceedings regarding statute-barred liabilities. This is for a simple reason: the taxpayer may be unaware that the tax office no longer has the authority to enforce tax payment. This practice, even if not very common, demonstrates the opportunistic attitude of tax authorities.
The tax office is pursuing me for tax arrears from several years ago. What should I do?
Above all, think carefully before taking any action. Disputes with tax authorities are generally lengthy and stressful. If you know that the amount owed is in the thousands or tens of thousands of zlotys, not hundreds, it's definitely worth contacting professionals – for example, BTTP.
There's a good chance that if the tax authority tries to collect tax on 2019 and 2020 income in 2026, it won't succeed. However, it all depends on your individual situation, so making decisions and adopting a specific litigation strategy on your own is very risky. Schedule a consultation today – we can help!
