Resolution of the SAC: fiscal criminal proceedings launched instrumentally do not suspend the limitation period

In its resolution of 24 May 2021 adopted by a bench of seven judges (file reference number I FPS 1/21), the Supreme Administrative Court stated that administrative courts must evaluate whether the launch of fiscal criminal proceedings was an abuse of law and was only aimed at suspending the limitation period for a tax liability. This means that an instrumental launch of fiscal criminal proceedings should not result in the suspension of the limitation period.

The matter addressed in the Supreme Administrative Court’s resolution concerned the practice of tax authorities who often launch fiscal criminal proceedings regarding a tax liability in the very last months before the limitation period expires for this liability. By launching such proceedings and notifying the taxpayer thereof tax authorities establish a premise for suspending the limitation period for the tax liability for a given accounting period. This means that during the entire fiscal criminal proceedings the limitation period for the tax liability ceases to run (regardless of whether or not these proceedings will be later discontinued as groundless). The tax authority may therefore “easily gain” additional time to perform tax proceedings and challenge the taxpayer’s accounts.

In its resolution the Supreme Administrative Court unequivocally confirmed that administrative courts may evaluate whether the launch of fiscal criminal proceedings resulted in the suspension of the limitation period. If the court decides that the tax authority’s action was aimed solely at extending the time for issuing a decision, such an effect will not be achieved (which in turn means the tax proceedings would be discontinued).

The resolution introduces the need to review specific circumstances of a given case and to assess whether the activities performed under the fiscal criminal proceedings were of an apparent nature. The assessment must involve and cover any and all activities undertaken by the tax authority, including but not limited to:

• when were fiscal criminal proceedings launched? (for instance, was it by any chance the last quarter before the limitation period expires),
• were there any charges pressed as part of the fiscal criminal proceedings?,
• whether any procedural steps were taken as part of these proceedings?,
• whether the activities performed within the framework of fiscal criminal proceedings were apparent or not?

When making a decision after the basic and initial limitation period expired, the tax authority should justify that it is entitled to rule (i.e. to provide information indicating the launch of fiscal criminal proceedings was not instrumental).

Yesterday’s resolution of the Supreme Administrative Court may be of paramount importance for taxpayers for whom the tax authorities issued (or intend to issue) a decision after the five-year limitation period expired in which the authorities cited the premise of its suspension as a result of fiscal criminal proceedings being launched. It may turn out that these decisions should be repealed and the proceedings discontinued (due to the expiry of the limitation period for the tax liability).

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If you need more information on the above and its impact on your business, please contact:

Tomasz Michalik                     Tomasz.Michalik@mddp.pl                   tel. 501 733 720

Jakub Warnieło                      Jakub.Warnielo@mddp.pl                     tel. 600 816 431

or your MDDP advisor.