The difficulties in obtaining VAT reimbursements, insufficient changes in income taxes and the worrying extension of the powers of financial authorities in the area of property forfeiture and customs and tax controls are only some of the comments made to the last amendment of the special legislation. COVID-19 by the Ombudsman in a letter to the Minister of Finance dated 22 April this year
Ombudsman, examining the rules Act dated 16 April 2020 specific support instruments for the spread of the virus SARS-CoV-2 (Next: Crisis Shield 2.0.), He concluded that while the changes in principle are heading in the right direction, they do not introduce new fundamental solutions to provide real financial support to taxpayers. As the RPO stressed, the rules are intended to primarily serve the tasks of the tax administration rather than to provide real financial assistance to taxpayers.
The following are important areas of concern, which the Ombudsman pointed out, in view of the need to provide taxpayers with effective protection during the epidemic.
The amendment also provides for new powers for controls, i.e. the power to review goods and means of transport and the power to check the counterparty of the entity subject to restrictions or prohibitions
VAT refund
Crisis shield 2.0. has not resolved problems with the difficulties in obtaining VAT reimbursement by traders.
Despite numerous calls from business associations, the anti-crisis shield 2.0. in vain, seek records of the shortening of the VAT refund period. Therefore, the main time limit for tax reimbursement is still the period 60 days.
However, entrepreneurs are concerned that the large impact of applications to tax authorities and the reduction of the staff resources of the tax administration will not receive a refund within the expected deadline. In addition, the original version of the Anti-crisis Shield contains solutions for the suspension of time limits for tax proceedings and with them concerns as to whether the Authority will be able to extend the deadline for tax reimbursement.
So can the VAT reimbursement deadlines be extended under the current rules?
According to Article 15 zzs section 1 point 7 Act dated 2 March 2020 specific prevention, prevention and eradication solutions COVID-19, other infectious diseases and the resulting crisis situations (hereinafter: coronavirus speciality), for the duration of an epidemic or epidemic situation, procedural time limits have been suspended, inter alia, in tax proceedings, and the running of deadlines which have not yet begun has been suspended.
It is worth noting that the time limits concerning tax obligations of a material nature have not been suspended, except as expressly defined in the provisions of the anti-crisis law or regulations of the Minister of Finance. An example of a term that has not been suspended or deferred is the time limit for VAT reimbursement.
Consequently, VAT refunds should continue to be carried out on the basis of existing rules. However, the situation may become more complicated when the VAT refund raises doubts for the tax authority and therefore requires verification. In such a situation, as so far, the tax authority will be able to initiate an investigation (e.g. tax or customs and tax checks), whose term of conduct and termination may already be suspended, on the basis of the coronavirus speciality.
Within the framework of the resolution adopted in the specific law, the authorities shall not be bound by any of the time limits laid down in the tax rules, including time limits for the examination of the case. Therefore, the extension of proceedings during an epidemic or an outbreak cannot constitute a ground for inaction.
Provision Article 15 zzs section 1 point 7 Coronavirus specifics shall suspend the time limits for the procedures and controls indicated, irrespective of their subject matter. This means that proceedings and checks aimed at verifying the appropriateness of VAT reimbursement may also be suspended during the outbreak.
However, the initiation of the investigation should be duly and exhaustive That's right. An example of this position may be the Supreme Administrative Court’s judgment dated 13 September 2019 reference no. I FSK 1069/19, which stresses that the Authority must justify its doubts in extending the VAT refund by indicating on what basis the tax authorities had doubts about the conduct of transactions carried out by the Party.
In view of the current situation, it is unlikely that the tax offices will start returning to taxpayers more quickly the excess VAT on purchased goods and services. The recovery of VAT will continue to depend in many cases on the recognition of the investigating officer.
Currently, taxable persons still have to apply for a refund of VAT at an accelerated time (i.e. within 25 days), based on one of the two possibilities provided for in the VAT Act:
- - for a special VAT account, which does not require any additional formalities, but the possibility of having funds collected on that account is significantly limited;
- - for the ordinary account of the entrepreneur, which requires a number of conditions and therefore only some entrepreneurs can benefit from this solution.
Loss of retained items
New provisions introduced by the Crisis Shield 2.0. gave tax authorities the right to issue provisions on the free transfer of goods to, among others, medicinal agents, police, state institutions and local authorities.
The change may seem insignificant, but it means that the financial investigation authorities will also be competent in matters relating to the free transfer of items to medicinal persons and to other institutions occupied. They will therefore acquire the right to rule on the forfeiture of private property even before the final termination of the proceedings.
According to the Ombudsman, this is too broad a right which results in excessive interference with property rights. The new powers of the financial authorities are similar to the forfeiture of property which, under the Constitution, can only take place on the basis of a final judgment of the court.
Presumption of service during an outbreak
According to the Crisis Shield 2.0. unreceived letters, the date of receipt of which specified in the notice of leave of the letter, together with the possibility of receiving it, would not be considered to have been received during the period of the epidemic or epidemic, and before the expiry of the 14 days from the day of the abolition of these states.
However, this principle does not apply to: proceedings referred to in Section IIIB of the Act Tax Ordinance (countering the use of the financial sector for tax fraud), as well as tax checks, customs checks and tax proceedings, where those checks or proceedings involve suspicion of a criminal offence, or fiscal criminal offence.
Thus, in practice, the authorities will accept that such documents have been served in these proceedings and will have legal effects. This means that an exception was introduced for a rule which was intended to protect traders from the negative effects of mail delivery, which they were not able to get acquainted with, which concerns this correspondence, which could entail serious consequences for public debt.
The solution is certainly different from the expectations of entrepreneurs and serves the interests of the state budget or bodies rather than taxpayers. The fact that the presumption of service will continue to apply to the specific proceedings referred to above demonstrates the government’s determination to ensure that the activities aimed at safeguarding the continuity of revenue to the budget can be carried out.
Analysis of economic phenomena
The new powers conferred on the clearing house to analyse the effects of economic phenomena, including in particular their impact on the financial liquidity of entrepreneurs and other entities, will allow for the collection of a wide range of business settlement data.
Since the amendment is permanently introduced into the legislation Tax Ordinance the question arises of how these competences will in practice be used by the financial authorities, whether exclusion for the purposes of combating the negative effects of the virus outbreak will be limited. COVID-19, whether they will also be used for other purposes.
Customs and fiscal controls
The amendment also extended the scope of customs and tax controls to comply with the provisions of the Act on the Prevention and Control of Human Infections and Infectious Diseases (Journal of Laws of 2019, item 1239 as amended).
To carry out this inspection, the official card and the permanent authorisation to check are currently sufficient. The amendment also provides for new powers for controls, i.e. the right to review goods and means of transport as well as the right to review the counterparty of the entity to which the restrictions or prohibitions apply.
The directory of entities to which the files covered by fiscal secrecy may be made available has also been extended.
As regards customs and fiscal checks, compliance with the rules issued on the basis of Article 46(4)(2) Act dated 5 December 2008 on the prevention and control of infections and infectious diseases in humans, and thus on the establishment of restrictions or prohibitions on the marketing and use of certain objects or food products, the file may also be made available to the voivode.
This provision constitutes an amendment Tax Ordinance, Whereas only the situations referred to in the Act on the Prevention of Infections and Infectious Diseases are to be addressed.
No possibility of waiving liner tax
An important request made by entrepreneurs, who have not yet seen a solution in the previous installments of the anti-crisis shield, is the possibility for entrepreneurs to resign from the liner tax.
The choice of a liner tax obliges an entrepreneur to adhere to this form of taxation throughout the tax year without the possibility of switching during that year to another. The decision to apply a linear tax was made by entrepreneurs at the beginning of the year when no one predicted the size of the epidemic.
Currently, when taxpayers' income has fallen significantly, they still have to pay 19% a linear PIT tax.
The taxpayers, for whom the linear PIT has become unprofitable, consider winding up the company and setting up a new, with a more favourable form of taxation, i.e. with a tax scale or a flat-rate form of taxation. This would be attractive for companies whose activities have been significantly reduced due to the pandemic.
However, let us remember that when the taxpayer does not change the subject matter of business, contractors or equipment, the tax authorities may consider that the closure of the business is an activity carried out only for the purpose of obtaining tax savings and, consequently, there has not been a liquidation of the activity.