Active remorse – how to effectively avoid penalties for late tax obligations?

 Did you miss the deadline to file your tax return? Or perhaps you concealed the true scale of your business activities from the tax authorities? Did you forget to pay the due taxes on time? Unfortunately, for various reasons such as forgetfulness, lack of knowledge, or a simple mistake, it often happens that tax obligations are not fulfilled on time or in accordance with applicable regulations. In such situations, there is a concern that the taxpayer will be penalised. Fortunately, it is possible to avoid penalties through the institution of “czynny żal” (active repentance), i.e. voluntary notification of committing a tax offence or tax misdemeanor.

What is czynny żal?

According to Article 16 of the Fiscal Penal Code, a perpetrator who, after committing a prohibited act, notifies the competent authority responsible for prosecution and discloses essential circumstances of the act, in particular persons cooperating in its commission, shall not be subject to penalty for a tax offence or tax misdemeanor. This allows one to avoid punishment, provided certain conditions are met.
 

How to submit czynny żal?

An entrepreneur will not be entitled to benefit from czynny żal if:

• the prosecuting authority already has clear documented information about the commission of the tax offence or misdemeanor;
• the prosecuting authority has commenced official activities, in particular searches, verification actions, or inspections aimed at uncovering the tax offence or misdemeanor, unless these activities did not provide grounds to initiate proceedings for the prohibited act;
• the person directed the execution of the disclosed prohibited act;
• the person exploited another person’s dependence on them and ordered that person to commit the disclosed prohibited act;
• the person organised a group or association for the purpose of committing a tax offence;
• the person incited another to commit a tax offence or tax misdemeanor.

Czynny żal will therefore be effective only when the entrepreneur admits to committing a tax offence or misdemeanor *before* the prosecuting authority independently documents the offence or before the authority begins activities aimed at detecting the offence or misdemeanor. Therefore, despite the absence of a statutory deadline for submitting czynny żal, it is recommended that the entrepreneur acts as soon as possible.
To use this institution, a written notification must be submitted to the appropriate tax authority. This notification should thoroughly describe the mistake made, indicate the circumstances, and detail remedial actions taken, i.e. settling outstanding tax liabilities along with due interest. It is worth remembering that czynny żal can be submitted not only in writing but also orally for the record at the tax office. Czynny żal can also be submitted electronically, for example via the e-Tax Office (e-Urząd Skarbowy).

Importantly, czynny żal should be submitted by the person who failed to fulfil the obligation. Thus, if an entrepreneur uses an accounting office and the fault lies with the office, then the office is the one to submit czynny żal.

Summary

Czynny żal is an institution that can help the taxpayer and protect them from serious consequences. It is crucial that czynny żal meets all formal requirements. Although submitting czynny żal does not exempt one from paying outstanding taxes and interest, it allows avoiding additional penalties. In case of doubts, we invite you to contact us, also remotely: https://atl-law.pl/prawo-podatkowe/