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Decision related to all taxpayers: How the interest from the tax authorities will be paid to the taxpayers

A decision from 20^th October 2015 of the Romanian Constitutional Court will change, in favor of the taxpayers, the system of granting interest by the tax authorities.

The companies or natural persons who need to recover, because of several situations, amounts from the budget, will be able to request interest from the next day after the payment is done. At the moment, according to the Fiscal Procedure Code, the interest of 0.03% per day (modified at 0.02% per day from 2016) is granted on request only after some deadlines are fulfilled, and not starting with the day following the payment to the budget.

For example, this may be: overpaid amounts from VAT, profit tax, income tax, claw back tax, etc. as a result of some computations errors, misinterpretations of the legislation, mistakes at the moment when the statements are filled in etc. and as a result of the unavailability of some amounts by the tax authorities through the garnishment, seizure, etc.

Recommendation: The new conditions for granting the interest are, in the opinion of Contexpert, very advantageous for the taxpayers. They should make a careful analysis (checking the status of accounting records, the payer file, the financial administration’s records etc.) and not be reserved in asking them if they have this right.

 Specifically, the Court decided that the granting of interest after some deadlines (45 days, 60 days etc.) established by the Fiscal Procedure Code is unconstitutional on the reason that:

“it generates unjust enrichment of the state in the detriment of the taxpayer’s heritage, due to the impossibility of using the amount charged as unlawful and the person’s deprivation of an adequate compensation for the loss suffered by the payment of that amount”

What types of amounts is it about?

According to the Article 117 of the Tax Procedure Code, shall be returned on request, the amounts paid:

• without the existence of a promissory note
• in addition to the tax obligation
• due to a calculation error
• due to the incorrect application of the law
• refunded from the state budget (for example VAT; claw back tax)
• established by the decisions of the judicial authorities or other competent authorities according to the law
• remained after the distribution referred to at art. 170 (in case of insolvency)
• resulted from selling the seized goods or retained by withholding, as applicable, under the court decision ordering the cancellation of forced execution (provisional measures imposed by the tax authorities and abolished by the court)

What are the deadlines?

The deadlines established by the Fiscal Procedure Code from which the interest stipulated in the Article 117, paragraph 2 and 2^ 1 and article 70 paragraph 1 and 2 will apply, are:

• 60 days from the communication date of the tax decision for the amounts to be refunded representing tax differences resulted from the annual regularization of the income tax owed by natural persons.
• 5 working days from the cashing date for the amounts collected by withholding, in addition to the tax liabilities for which the garnishment was applied.
• 45 days after the registration of the VAT reimbursement (which may be extended with the period between the date of the request and the date when the requested information are received, if additional information are necessary)

To remember! If amending statements and refund requests are submitted (for amounts arising from any type of tax overpaid to the budget), interest may be required for the entire period from the date the payment was made, and not from the date when the application is submitted, as it happens now. For example, if you will apply for a refund of an amount on December 1^st 2015, but you paid the amount for which you submitted the request on November 1^st 2015, the state will owe you interest from November 1^st 2015 until the refund day. In accordance with the legislation applicable at this moment, the interest would have been granted starting with December 1^st 2015 until the refund date.

What is the legal route?

The Court’s decision from 20^th October must be transposed in the Fiscal Procedure Code. The articles declared unconstitutional are found in the actual Procedure Code, and starting January 1^st 2016 will come into force the new Code, respective Law 227/2015. In these circumstances, it should be amended also the new Fiscal Procedure Code in accordance with the Court’s decision.

Court states that “the decision is final and generally binding and shall be communicated to the two Chambers of the Parliament, to the Government and the Court that notified the Constitutional Court, respective the High Court of Cassation and Justice – Department for litigation and fiscal administrative.”

What article is unconstitutional?

The provisions of the article 124, paragraph (1) reported to those of the article 70 of the Government Ordinance no.92 / 2003 regarding the Fiscal Procedure Code are unconstitutional: “for the amounts to be returned or reimbursed from the budget, the taxpayers are entitled to an interest from the day following the expiration of the deadline stipulated in article 117 paragraph (2) and (2 ^ 1) or in article 70, as applicable, upon the date of settlement by any of the means provided by law. Interest granting is made at the request of the taxpayers. “