The surplus of the input tax over the output tax can be carried over only for 5 years!

Please be informed that at the beginning of this year, the Polish Supreme Administrative Court has upheld the unfavorable for the taxpayer tax authorities’ decision, that in accordance with the Polish VAT Act regulations the 5 year of the limitation period also applies to the surplus of the input tax over the output tax. It means that the surplus cannot be carried forward in the subsequent period indefinitely.

In the case, the taxpayer reported for the first time the surplus of the input tax over that output tax in one of the VAT return period in 2010 and carried it forward for almost 7 years. Then reported in 2017 the VAT refund and the Polish tax authorities questioned this practice. The tax authorities applied the 5 years of the limitation rule, like in other tax cases. It was stated that the right to the VAT refund expired at the end of 2015.

The taxpayer challenged the tax authorities’ decision to the administrative courts. Unfortunately, at the last instance of court proceedings, the Supreme Administrative Court ruled in favor of the tax authorities.

The problem above is not new. In the past, the Polish tax authorities together with administrative courts settled in similar cases. The judgment only confirmed forming the unfavorable jurisprudence line in the Polish administrative courts.

According to above, the taxpayers applying for a VAT refund of the surplus of the input tax over the output tax, after years of carrying it over to the subsequent settlement periods (when 5 years have already passed) may come across with a refusal to refund it by the Polish tax authorities.

Łukasz Woźniak
Senior Tax Consultant

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