Tax 

Judgment of the Supreme Administrative Court on default interest

In February 2021, the Supreme Administrative Court issued a judgment in which it commented on the length of the period for which interest on late payment of tax arrears is applied.

Legislation

In the event that a tax is not paid on time and the tolerance period (currently 3 days) has passed, the taxable entity is obliged to pay default interest. In its version applicable until 31 December 2014, the Tax Code stipulated, in contrast to the current legislation, that default interest can be applied for a maximum of 5 years of default. By the amendment to the Tax Code effective from 1 January 2015, the provision concerning the maximum interest period was cancelled. However, since the amendment does not contain any transitional provision regarding default interest, a dispute arose over which cases of default interest the maximum interest period applies to and which it does not.

Conclusion of the Supreme Administrative Court

The Supreme Administrative Court stated that with regard to the rights and obligations affecting the substantive scope of the taxable entity, tax authorities are bound by the legal regulations effective at the time the tax debt arose. Based on this, the Court has reached the conclusion that when assessing interest on late payment of tax in a taxation period with an original maturity date no later than 31 December 2014, the tax administrator is obliged to take into consideration the maximum interest period of 5 years.

To which cases does the conclusion of the Supreme Administrative Court apply?

The conclusion of the Supreme Administrative Court may affect, for example, cases of additionally assessed income tax in the 2013 taxation period and older, or value-added tax in the taxation period of November 2014 and older, if the default interest was assessed by the tax administrator after 1 January 2015 and, at the same time, the maximum tax payment period of 6 years has not yet passed.

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