Tax interest refers to charges imposed by tax authorities in case of delays in settling tax obligations. They often result from calculation errors, late payments, or filing taxes after deadline. Learn what tax interest is, how it is calculated, and how to avoid it.
What is Tax Interest?
According to the regulations, tax arrears are subject to late payment interest. This is also referred to as tax interest.
Tax authorities charge with interest when taxpayers don’t pay liabilities on time. This results from statutory deadlines.
Tax interest arises from:
- unpaid taxes, tax advances, or tax instalments by the due date,
- incorrectly declared and refunded overpayments,
- tax refunds.
Tax Interest – How Much Is It?
The late interest rate is equal to the sum of 200% of the basic Lombard rate determined in accordance with the provisions of the National Bank of Poland and 2%, though the rate may not be lower than 8 %.
The Monetary Policy Council decided on 4 April 2024, to keep the NBP interest rates unchanged. Hence, the Lombard rate is currently 6.25%. Therefore, the tax interest rate is currently 14.50%.
A reduced interest rate applies to tax arrears that occurred from 1 January 2016 onwards. It amounts to half of the standard rate. Yet, taxpayers must meet the following conditions:
- Independent submission of a correction declaration. You should do it within 6 months from the deadline for submitting the declaration.
- Payment of the tax arrears within 7 days of submitting the correction.
When is Tax Interest Calculated?
The obligation to pay tax interest arises when the delay is significant. The amount due must be sufficiently high.
According to regulations, tax interest is not calculated if the amount does not exceed 3 times the value of the fee charged by the designated operator for treating a standard letter as a registered letter. This results from the Act of 23 November 2012 – the Postal Law. The mentioned fee is 2.90 PLN for now. As a result, tax interest is not calculated if its amount does not exceed 8.70 PLN.
Entities involved in calculating tax interest include:
- taxable entities,
- taxpayers,
- collectors,
- legal successors, or third parties responsible for tax arrears.
How to Calculate Tax Interest?
To calculate tax interest on your own, you can use a tax interest calculator. The calculated amount will help determine the outstanding sum.
Tax interest can also be calculated using the following formula:
(Ar x Ndd x TI) / 365 = calculated tax interest
Ar – amount of arrears
Ndd – number of days delayed
TI – tax interest rate for delays
The calculated tax interest is rounded to the nearest whole value in PLN. What does it mean? The amounts lower than 0,50 PLN are omitted, while amounts higher than that are rounded up to the PLN.
How to Avoid Paying Tax Interest?
There is a possibility to apply for the waiver of tax interest. You should then demonstrate that it is justified by significant taxpayer’s or public interest. The waiver of tax interest applies to taxes with expired payment deadlines. Future payments do not qualify.
Tax Interest – summary
Tax interest can apply to both individuals and businesses. Their amount depends on the reference rate of the National Bank of Poland. Implementing strategies to prevent tax interest is key to avoiding additional costs.
If you want to know more, our specialists are at your disposal. Feel free to contact our law office!
FAQ – Questions and Answers on Tax Interest
What is tax interest?
Tax interest is an additional charge imposed by tax authorities. They are a consequence of delays in tax payments.
What are the reasons for calculating tax interest?
The most common reasons include delays in tax payments, errors in tax declarations, and submission of documents after the deadline.
What is the amount of tax interest?
The amount of tax interest depends on the reference rate of the National Bank of Poland increased by a specified percentage.
Can tax interest be avoided?
Yes, by timely tax payments, accurate calculations, and regular review of tax documentation.
Is tax interest deductible?
No, tax interest is not considered a cost of obtaining income and you cannot deduct it from tax.
What are the consequences of not paying tax interest?
Failure to pay tax interest can lead to additional fines. Moreover, it can lead to enforcement proceedings and other legal consequences.
Can one negotiate the amount of tax interest?
No, the tax interest rate is determined by law and is not subject to negotiation.
Can the payment of tax interest be divided into instalments?
In some cases, negotiations with tax authorities for a repayment plan may be possible. This depends on the taxpayer’s situation.
What documents should you provide to avoid tax interest?
All tax declarations must be submitted on time. Tax obligations must be settled according to the specified deadlines.
Can a tax advisor help avoid tax interest?
Yes, tax advisors can assist in filing taxes correctly. This reduces the risk of incurring tax interest.
