The summer holiday season is a great time to take a vacation. However, our office remains fully operational. That's why we're launching our regular Monday newsletter on tax law. We'll be highlighting the complexities of tax law and highlighting the most interesting rulings from national courts and the Court of Justice of the European Union.
It's no surprise to anyone that when taking out a loan or credit, we repay the money received along with the accrued interest. This represents compensation for using someone else's capital for a specified period. But what happens when we "grant the loan" and the State Treasury is the borrower? I'm referring to a situation where we pay too much tax, or it later turns out that the amount we paid shouldn't have been collected at all. Of course, the State Treasury will refund the overpaid tax. But what about the interest?
The Court of Justice of the European Union addressed this very issue in its judgment C-322/22 of 8 June 2023. In this case, in 2017, a taxpayer requested the head of the tax office to determine an overpayment of income tax for the years 2012-2014 collected by the tax remitter and to refund it, along with interest for the periods from the date of collection to the date of refund. The determination of the overpayments results from the judgment of 10 April 2014, Emerging Markets Series of DFA Investment Trust Company (C-190/12, hereinafter referred to as the "Emerging Markets judgment", EU:C:2014:249).
It should be noted that one of the causes of a tax overpayment may be a ruling by the Constitutional Tribunal or the Court of Justice of the European Union declaring that a provision of the statute under which the tax was calculated or collected is inconsistent with the Constitution or EU law. In such a case, the Tax Ordinance makes the payment of interest dependent on the date the taxpayer submits an application to establish an overpayment.
If such an application is submitted within 30 days of the entry into force of the Constitutional Tribunal's judgment or the publication of the operative part of the judgment of the Court of Justice of the European Union in the Official Journal of the European Union, or of the date on which a legislative act is repealed or amended in whole or in part, then interest accrues from the date the overpayment arose until the date of its refund. However, if the application is submitted after this deadline, but the overpayment arises before it expires, interest will accrue from the date the overpayment arose until the date of its refund. However, the regulations do not provide for the payment of interest if both the overpayment and the application for its determination arise after the 30-day deadline.
In the case at hand, the tax office paid the taxpayer the overpaid tax, along with interest, in accordance with the provisions of the Tax Ordinance. Therefore, the taxpayer did not receive interest accrued up to the date of the overpayment refund. The Provincial Administrative Court in Wrocław dismissed the taxpayer's complaint, finding the tax authorities' action to be correct. Only the Supreme Administrative Court questioned whether the national regulations (Article 78 § 5 points 1 and 2 of the Tax Ordinance) were inconsistent with EU law. Therefore, it referred a question to the CJEU for a preliminary ruling.
The Court, in turn, held that the principle of effectiveness, in conjunction with the principle of sincere cooperation [as derived from Article 4(3) of the Treaty on European Union], must be interpreted as precluding national legislation which, where an application for the refund of a tax overpayment is submitted after the expiry of 30 days following the publication in the Official Journal of the European Union of a judgment of the Court finding that the taxation in question is contrary to EU law, limits the interest on the overpayment payable to the taxpayer concerned to the 30th day following that publication, or even excludes any interest where that overpayment was incurred by the taxpayer after that 30th day .
This judgment opens the way to claiming interest on tax overpayments that have not yet expired.
If you would like more information on this topic, please contact us.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of July 10, 2023
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