Corporate income tax payers are required to pay monthly advance payments for tax (Article 25 (1) of the CIT Act).
Basically, one can pay them as so-called “actual” advances (we calculate the tax on the income earned since the beginning of the tax year minus any advances paid so far or the so-called “simplified” advances (every month, 1/12 of the tax from the result from 2 years ago).
Naturally, there may be many special situations here, but regardless of what variant we are dealing with, there may be one common problem – the calculated advance payment may be too high compared to the tax expected after the end of the year. This situation is unfavorable for both the taxpayer and the tax authority. The former will pay too much and will have to wait for the return, while the latter will have to return the money.
To solve this problem, the provisions of the Tax Ordinance provide for the possibility of limiting the collection of tax advances (Article 22 § 2a of the Tax Ordinance).
Pursuant to this provision, the tax authority, at the taxpayer’s request, limits the collection of tax advances if the taxpayer proves that the advances calculated in accordance with the principles set out in the tax laws would be disproportionately high in relation to the tax due on the income expected for a given tax year.
This means that if the taxpayer “proves” that there will be a surplus (of payments over the final obligation) and the surplus will be “disproportionately” high, the authority should be obliged to decide on the limitation of collection.
In theory, therefore, it is not a discretionary decision of the authority – if the conditions are met, the authority issues a positive decision.
In practice, we are dealing here with indeterminate phrases (plausibility, disproportionate), which means that there is no automatism here – the application must contain proper argumentation and supporting evidence.
First, the question of making it plausible. It functions in legal regulations as a “substitute measure” for evidence. While proving gives us certainty (proving), the result of proving probability is the probability of some circumstances (such as the Supreme Administrative Court in the judgment of 11 April 2018, file ref. II FSK 818/16).
The use of substantiation is necessary here. You can, for example, prove what the taxpayer has earned since the beginning of the year. However, its revenues until the end of the year will be only a forecast, an assumption.
In practice, calculations of the projected result and supporting evidence for the assumptions should be provided here. In addition to financial forecasts, circumstances should also be presented – e.g. market collapse, drop in revenues and related circumstances. For example, if we trade in listed products, we can show current price developments or published forecasts. Statistical data or data of public institutions are also a valuable source.
If, for example, a taxpayer plans to settle tax reliefs in an annual tax return, it should present the tax authority with activities planned for this year and the calculation of the allowances.
In practice, it will be much easier in to reduce the “simplified” advances, because here the element of the potential tax liability by the end of the year is already known. It is more difficult to prove such a circumstance with “actual” advances.
As for the concept of “disproportionate”, it is not interpreted very strictly. The Supreme Administrative Court notes that “The disproportionate amount of advances referred to in Art. 22 § 2 point 2 of the tax ordinance, means such a state of affairs in which the amount of tax, on the basis of known or foreseeable elements of the facts, is assessed as lower than the sum of advances due in a given settlement period. ” (judgment of 24 May 2002, file reference number I SA / Ka 738/01).
At the same time, there is no lower limit for reducing advances – it is even possible to reduce it to “PLN 1.00”.
In practice, the key issue in the scope of the entire procedure is to present clear calculations and appropriate evidence for the circumstances cited.