Interest on tax arrears

Interest on tax arrears
Marek Cieślak

Marek Cieślak

CEO CGO Finance

Interest on tax arrears includes fees that tax authorities charge when there are delays related to tax obligations. They can result from failure to make payments by a certain date or filing a return after the due date. See how they are calculated and how you can avoid them. We invite you to read.

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.
Interest on tax arrears

Interest on tax arrears – 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.

What are the important tax deadlines and limits in 2024? Check here.

When is interest on tax arrears 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.
Interest on tax arrears

How to calculate interest on tax arrears?

To calculate interest on tax arrears 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 interest on tax arrears?

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.

Interest on tax arrears

Interest on tax arrears – summary

Interest on tax arrears 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 Interest on tax arrears

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 interest on tax arrears?

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 interest on tax arrears?

The amount of tax interest depends on the reference rate of the National Bank of Poland increased by a specified percentage.

Can interest on tax arrears be avoided?

Yes, by timely tax payments, accurate calculations, and regular review of tax documentation.

Is interest on tax arrears 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 interest on tax arrears?

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 interest on tax arrears?

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 interest on tax arrears?

All tax declarations must be submitted on time. Tax obligations must be settled according to the specified deadlines.

Can a tax advisor help avoid interest on tax arrears?

Yes, tax advisors can assist in filing taxes correctly. This reduces the risk of incurring tax interest.

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Marek Cieślak

CEO CGO Finance