Sometimes, the victim is forced to enter the courts to recover his compensation. Interest may also be claimed in damages, in addition to the amount of compensation claimed. The Supreme Administrative Court confirmed that the interest on compensation was not due and that the PIT had to be paid.
An individual interpretation of tax law was requested by a taxable person who considered that the interest charged with compensation also benefited from the exemption in question under Article 21(1)(3b) Act dated 26 July 1991 on personal income tax (Journal of Laws of 2019, item 1387 i.e.
of 25 July 2019) and form an integral part of this compensation. The applicant argued that if compensation is exempt from the tax, this exemption will also cover interest on late payment. The interpretation authority disagreed with the applicant, indicating that the interest is not included in the list of exemptions concerned.
They are revenue from other sources in question under Article 10(1)(9) in conjunction with Article 20(1) PIT laws and are subject to income tax on general principles.
The applicant disagreed with the justification of the authority and lodged a cassation complaint with the Provincial Administrative Court in Lublin, and dismissed the complaint. Consequently, the case went to the Supreme Administrative Court.
The NSA, after examining the cassation complaint against the judgment of the WSA in Lublin, also dismissed it, thus confirming the position of the WSA in Lublin.
Compensation received by a natural person on the basis of a judgment or court settlement shall in principle be exempt from income tax (PIT)
According to the Supreme Administrative Court, the scope of this provision should be determined taking into account the interpretative directives applicable to the interpretation of the provision introducing the tax exemption.
It is clear in the case law of the administrative courts that language interpretation is essential in relation to the provisions introducing tax relief and exemptions. Consequently, any provisions governing tax relief and exemptions must be interpreted strictly.
This means that it is unacceptable to seek out the intentions of the legislator and to create on this basis standards beyond the linguistic and clear wording of the provision.
According to the NSA, it should be noted that in "Article 21(1)(3b) The PIT Act refers to the tax exemption received on the basis of a judgment or settlement, compensation or redress.
On the other hand, Article 361 Act dated 23 April 1964 Civil Code ( Journal of Laws of 2018, item 1025 as amended) provides that the compensation of the damage shall cover the losses suffered by the injured party and the benefits which he could have achieved if the damage had not been caused to him.’ The NSA also indicated that the amount of the damage was determined by the extent of the compensation obligation, whereas the principle of restitution precludes the possibility of enrichment of the victim.
Court second He emphasised that civil law "there is a distinction between the terms "damage" and "wreck". first of them refers to the material effect of the infringement of goods, and second, according to Article 444 and Article 445 K.C., it means an immaterial effect of violating personal property.
The concept of 'indemnification' is referred to as covering damages of a material nature, and the concept of 'reparation' is referred to as covering damages of a nonmaterial nature, or harm. It should therefore be noted that these two concepts mean the main (essential cash benefits) related to compensation for injury.
Where, according to the NSA, ‘the editorial board of a provision establishing a tax exemption, taking into account the need to interpret it within the limits of the possible meaning of words (used in it), the unacceptable interpretation procedure makes the scope Article 21(1)(3b) The PIT Act includes, in addition to the main benefit (compensation, compensation) also the side benefit of interest.’
In its judgment, the NSA stated that such a far-reaching interpretation Article 21(1)(3b) The PIT Act ‘is not justified in the language framework of the rule under consideration, which explicitly treats compensation and redress.
The legislator, using the terms 'compensation' and 'reparation', did not give them an over-normative, broad meaning in the abovementioned provisions. Therefore, since ‘interest on late payment in the performance of a cash benefit is neither adequate compensation nor compensation, it does not fall within the scope of the tax exemption’.
In conclusion, according to the NSA, interest on late payment of the compensation due does not benefit from income tax exemption. The PIT should therefore be deducted from them.
Judgment of the Chief Administrative Court of 30 January 2020 reference no. II FSK 433/18