How to proceed with income tax advances in the current situation? And what if we expect a tax rebate (i.e. we have overpaid advances)?

On our blog, we have already reported on the mitigating tax measures approved by the government in relation to the current situation caused by the spread of coronavirus. The Ministry of Finance has now prepared further measures, which also relate to obligations to pay advances for income tax. So what are the options and obligations in the area of advance payments now? What if the taxpayer expects a tax overpayment? The comments below concern mainly taxpayers who are subject to the end of the deadline for filing income tax returns on April 1, 2020.

Following the publication of the first mitigation measures (the so-called first liberalization package), some taxpayers were relieved that they did not have to file an income tax return or pay the tax balance by April 1, 2020. On the other hand, new questions arise, such as the payment of half-yearly or quarterly income tax advances. We recall that on 16 March 2020 one of the quarterly tax advances was due and on 15 June 2020 another is due.

Income tax waiver in June

As part of the second liberalization package, the government approved on Monday, March 23, the waiver of the June advance on personal and corporate income tax. Taxpayers who are obliged to pay the deposit in June do not have to.

What should a taxpayer do if he was unable to pay the advance payment in March?

Unfortunately, the payment waiver does not relate to the tax advance due in March. If it is not paid, interest on late payments arises for the taxpayer. However, according to the government measure, these will be waived across the period up to 1 July 2020. Therefore, if the taxpayer is able to pay the advance by 1 July 2020, no action is necessary. However, if he / she already knows that he / she will not be able to pay the advance by the beginning of July, it is possible to request a postponement of its payment. In the event that the tax administrator accepts the application, the arrears balance will be remunerated at 7% rate plus the repo rate valid as of 1 July 2020. This rate is half of the standard default interest rate. Similarly, it is possible to request a postponement of each additional deposit except for June, which will be waived. If the taxpayer already knows that his income, respectively due tax for this year will be lower than the previous year, he has the opportunity to request a reduction of advances or waiver of their payment. However, such a request must be duly substantiated by a realistic estimate of profit or loss. In this context, it is recalled that the Government has approved the waiver of administrative fees for all applications submitted by 31 July 2020.

In the event of delay or delay in payment of advances for tax or the tax itself, the taxpayer may apply for remission of interest on late payment, respectively interest on the deferred amount, always after their payment. The tax administrator may take into account the circumstances and social and economic conditions of each particular case, in order to decide whether to waive interest in whole or in part. In doing so, the tax administrator proceeds according to the Guideline GFD D-21, in which an important factor is whether the taxpayer has previously duly fulfilled his tax obligations.

Subsequent filing of the tax return is not beneficial if you expect an overpayment.

However, in connection with the general waiver of penalties in the event of late filing of the tax return, it is also necessary to mention the situation in which the taxpayer incurs a tax overpayment based on the tax return for the last tax period. The tax administrator will return the overpayment to the tax administrator within 30 days of the deadline after filing the tax return. Taxpayers who have already filed a tax return or filed before April 1, 2020 should receive their tax overpayments no later than early May 2020.  However, if they file a tax return later, the 30-day refund period will only run from the date of actual filing.

From this point of view, it is preferable that taxpayers expecting tax overpayment do not delay and file it by April 1, 2020. In contrast, those tax payers for whom the advance payments based on their 2019 tax will not be sufficient and who will be required to pay extra tax, will appreciate the possibility of postponement until July 1, 2020.