A longer period of control of the entrepreneur's settlements

The act known as the Tax Ordinance regulates the limitation of a tax liability. And so, according to Art. 70 par. 1 tax liability shall expire after 5 years from the end of the calendar year in which the tax payment deadline has expired. After this period, the tax authority generally loses the right to verify the correctness of the taxpayer's settlements for this period. Check what the entrepreneur's billing control period is now!

Period of control of the entrepreneur's settlements

Entrepreneurs should remember that the period that will be subject to tax control may be extended when it settles the tax loss from previous years and in the case of depreciation of certain fixed assets.

The general rule of limitation of tax liabilities does not apply to CIT taxpayers who showed a loss and settled it within 5 consecutive years. The time in which the tax office can check the correctness of settlements may be extended by 5 years, i.e. by the period in which the taxpayer was entitled to deduct the loss. The tax authorities are authorized to initiate proceedings and issue a tax decision determining the amount of the loss incurred until the tax liability expires for the tax year in which the taxpayer reduced the income by the loss incurred.

The above position is reflected in the judgments of administrative courts. And so, the Supreme Administrative Court on January 25, 2012 in case no. II FSK 1345/10 ruled: “(...) The issue of the right to issue a decision determining the amount of the loss has already been considered by the Supreme Administrative Court. In the judgment of 15 May 2010, the Supreme Administrative Court presented the thesis that the right to issue a decision determining the amount of loss referred to in Art. 24 of the Tax Ordinance, is not subject to the statute of limitations within the meaning of Art. 70 § 1 of this Act, as it does not apply to tax liability, which, however, does not mean that it is not limited in time. This limitation results only from the function of the amount of the loss suffered by the taxpayer in previous years to establish the legal and tax status. The decision determining the loss pursuant to Art. 24 of the Tax Code may be issued as long as it is possible to verify the declaration for the tax year in which the loss was deducted. (...) ".

A longer period of control of the entrepreneur's settlements

Another possibility that allows the tax authorities to extend the period of verification of tax settlements is the taxpayer's depreciation write-offs on fixed assets for a period longer than 5 years (e.g. real estate). Due to the fact that they constitute tax costs and affect the income (loss) generated by the company, the entrepreneur must keep documentation justifying the amount of the write-offs until the expiry of the tax liability period of the year in which depreciation was completed.

The confirmation of the above opinion is the individual interpretation of the Director of the Tax Chamber in Katowice of September 7, 2012, ref. No. IBPBI / 2 / 423-688 / 12 / JD: "(...) the taxpayer is obliged to document the correctness of the income (loss) declared by him. Due to the fact that the depreciation write-offs made by the Company, as tax deductible costs affect the amount of the determined income (loss), it is necessary for the Company to store documentation not only for the entire period in which the depreciation write-offs affect the tax base (the amount of tax liability), but also also for a period of five years from the end of the calendar year in which the tax payment deadline expired, taking into account the situations provided for in the Ordinance in which the limitation period is suspended.

In summary, in the opinion of the local authority, there is no obligation to store source documents, since on their basis the initial value of the fixed asset was determined from which depreciation write-offs are made. Therefore, since the source documents are the basis for determining the initial value of fixed assets and indirectly affect the amount of the tax liability of the year in which depreciation write-offs are made, it should be stated that the above documents should be stored until the expiry of the tax liability period of the year in which depreciation was completed. (...) ".

Entrepreneurs should therefore bear in mind that the period of control of the entrepreneur's settlements by the tax authority may be significantly extended, therefore the books and related documents should be kept for an equally long time.