Interest on VAT sanctions: the tax office loses to taxpayers

Summary

• The Voivodeship Administrative Court (WSA) in Warsaw ruled that the tax office may not charge late-payment interest on an additional tax liability (the so-called VAT sanction imposed under Art. 112b–112c of the Polish VAT Act). [kontrolace…karbowa.pl], [prorachunki.pl]
• The reasoning rests on the settled principle that the additional tax liability is an administrative sanction, not VAT itself — it does not burden consumption and cannot be passed on to the buyer, so the arrears-interest regime does not apply to it. [lexedit.ai]
• The judgment strengthens taxpayers’ position in disputes and follows the line drawn by the CJEU in C-935/19 (Grupa Warzywna), which requires Polish VAT sanctions to respect proportionality. [codozasady.pl], [lexedit.ai]

Extended article

The additional tax liability under Polish VAT law is a distinct financial charge that a tax authority sets by decision when a taxpayer understates output tax, overstates a refund or an input-VAT carry-forward, or fails to file a return and pay the tax due. It is regulated by Art. 112b and Art. 112c of the VAT Act and stands apart from both the tax arrears and the late-payment interest that may arise from the same irregularity. [kontrolace…karbowa.pl]

The core of the WSA Warsaw ruling is the legal character of that liability. Polish administrative courts and the CJEU have consistently held that it is an administrative sanction rather than a component of VAT. The CJEU stated in C-502/07 that the mechanism does not have the features of VAT, and the Supreme Administrative Court (NSA) has repeatedly confirmed that the charge “does not burden consumption” and cannot be shifted onto the customer. Because arrears interest under the Tax Ordinance attaches to unpaid tax (tax arrears), and the sanction is not a tax, the court concluded there is no legal basis to add interest on top of it. [lexedit.ai] [ksiegowego.pl], [lexedit.ai]

The decision sits within a broader recalibration of Polish VAT sanctions triggered by C-935/19 (Grupa Warzywna). Following that judgment, the 2023 Slim VAT 3 amendments replaced the rigid 15/20/30% catalogue with ceilings, requiring authorities to weigh the nature and circumstances of each irregularity — a proportionality test that courts, such as WSA Bydgoszcz in I SA/Bd 330/24, have already applied to moderate sanctions to as low as 7.5%. For taxpayers, the practical takeaway is that arrears and interest remain due on the underpaid VAT itself, but the additional sanction should not itself generate further interest. [codozasady.pl], [lexedit.ai]

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