Supreme Administrative Court, I FPS 1/23
Ruling: The subject of a decision on securing a tax liability under Article 33 of the Tax Code of 29 August 1997 may not be an additional tax liability referred to in Article 112c of the Act on Value Added Tax of 11 March 2004.
Explanation: The Supreme Administrative Court was dealing with a case in which the Tax Office secured on the taxpayer’s assets not only their estimate tax liability, but also the additional tax liability, imposed in case of inter alia an undue reduction of the liability by the taxpayer. The question raised to the panel was whether or not the tax authorities must substantiate their claims against the taxpayer.
The panel took a completely different stance and declared, that no security may be imposed on an additional liability whatsoever. The panel described the dispute as a clash between the functions of the institution of security and the principle of proportionality, derived from the EU law. Taking the side of the principle of proportionality, it considered whether an additional liability may be subject to security. The panel reached a conclusion, that an additional tax liability is in essence an administrative sanction, rather than an actual tax liability. Therefore, it is impossible to secure such sanction under the provision of the Tax Code mentioned in the ruling.
It is worth noting, that the ruling was taken in the form of a resolution of seven Supreme Administrative Court’s justices. Such ruling is binding for all administrative courts and may be reverted only by another resolution.
Impact: The ruling should result in a change of the tax administration’s policy on imposing securities by reducing their numbers. In effect, taxpayers subject to fiscal control should be protected stronger than before from losing financial liquidity as a result of excessive security.
Although the resolution makes reference only to the most severe additional tax liabilities, imposed in case of conscious participation in a tax fraud by the taxpayer, the Court’s reasoning seems to be applicable also to additional tax liabilities referred to in Article 112b of the Act on VAT.
