On 21 March 2019 the taxpayer has won a dispute with the tax office and will receive a VAT refund of 120,000,000 PLN. It follows from the ruling of the Supreme Administrative Court that the scope of protection resulting from an individual tax ruling cannot be limited.
The Chief Administrative Court has resolved the matter one of the largest commercial real estate acquisition transactions in 2016, in Poland. The company acquired an office building for about 500,000,000 PLN. The value of the dispute reached 120,000,000 PLN, VAT to be refunded.
According to the Supreme Administrative Court, the extent of the protection resulting from the individual tax interpretation obtained cannot be narrowed by the tax authority and the protection resulting from the interpretation is independent of the tax result achieved by the taxpayer during the tax period in question
The companies which carried out the transaction, i.e. the purchasing and selling company, requested an individual tax ruling from the tax authorities, indicating that the transaction should be taxed on VAT. According to the interpretation, the individual selling company issued a VAT invoice and after receiving the amount plus VAT, it paid the tax to the tax office. Thus, the purchaser paid for the property an amount plus VAT, i.e. by 120,000,000 PLN.
After the transaction, the buyer requested a refund of VAT. On the other hand, the tax authority refused to repay it, claiming that the transaction was a supply of an organised part of the company rather than a single act and should therefore not be subject to VAT. According to the tax authority, the VAT refund was undue.
The tax authority also claimed that the individual tax ruling obtained could not be applied since the protection from the individual interpretation only covers the exemption from payment of tax arrears rather than the right to reimbursement of VAT.
June 2018 The Provincial Administrative Court in Warsaw criticised the position of the tax authority and repealed its decisions. According to the WSA, the tax authority interpreted the protection provisions of an individual tax interpretation too narrowly.
The WSA noted that such an approach to the individual interpretation provided by the tax authority would mean that the application of the law is a trap for the taxpayer. The WSA in Warsaw referred to the action of the democratic rule of law, indicating the principle of trust in state authorities.
The tax authority reiterated its view that the safeguarding power of the individual tax ruling does not fall within its scope of the right to refund VAT and brought a cassation action before the Supreme Administrative Court.
On 21 March 2019 The Supreme Administrative Court finally supported and confirmed the position presented by the Provincial Administrative Court in Warsaw, dismissing the cassation complaint of the tax authority.
The NSA pointed out, inter alia, that the protection resulting from an individual tax interpretation results in the release of the taxpayer from any negative effects associated with its application to the interpretation issued by the tax authorities, regardless of whether a tax liability occurred with the taxpayer during the taxing period, or the reimbursement of the excess tax chargeable and whether that return actually occurred.
The Supreme Administrative Court stated in its judgment declared that the scope of protection resulting from an individual tax ruling could not be reduced. With the NSA ruling, the tax authority lost the dispute and will have to return it to the taxpayer 120,000,000 PLN for VAT to be reimbursed.
According to the Supreme Administrative Court, the extent of the protection resulting from the individual tax interpretation obtained cannot be narrowed by the tax authority and the protection resulting from the interpretation is independent of the tax result achieved by the taxpayer during the tax period. Therefore, in this case, the protection from an individual tax interpretation also covers the right to a refund of VAT.
Author: Paweł Boś, law student at the Kozminski Academy in Warsaw, employee of Russell Bedford