Failing to pay taxes (PIT, CIT, VAT) on time results in accumulating interest, financial penalties, and even enforcement by the tax office. Find out what happens if you fail to pay your taxes – from late payment interest and tax fines to asset seizure by the authorities – and what options are available to business owners (sole proprietors) who miss their PIT advance payments. Learn how to resolve tax debt through installment plans, deferred payment deadlines, or bridge financing to avoid severe penalties and protect your business.
Penalties for late tax payments
Every business owner and taxpayer in Poland is required to pay their taxes on time, whether it's PIT (personal income tax), CIT (corporate income tax), or VAT (value-added tax). Failure to meet tax deadlines results in outstanding tax liabilities, which can lead to several penalties. Here’s an overview of the consequences of late tax payments:
Late payment interest
The first and most immediate consequence is late payment interest, which accrues on unpaid taxes. Just like in the case of social security (ZUS) contributions, interest starts accumulating the day after the due date and continues until full payment is made. The base interest rate for tax arrears is legally determined and has ranged around 14–15% per year in recent years (calculated as 200% of the NBP lombard rate + 2%, with certain limitations).
If a taxpayer voluntarily corrects their tax return and pays the overdue tax (a process known as “czynny żal” – voluntary disclosure), they may qualify for a reduced interest rate (75% or 50% of the base rate in some cases). However, in standard cases, the full interest rate applies. Unlike commercial loans, tax interest rates are non-negotiable and cannot be waived (unless they fall below a minimum threshold or the taxpayer obtains an official payment deferral). The tax office expects taxpayers to calculate their own interest and include it in their payment.
Example: If a taxpayer pays their PIT advance payment three months late, they must calculate the interest for that period and pay it along with the principal tax amount.
Tax fines and penalties
Failure to pay taxes may be classified as either a fiscal offense or a fiscal crime under the Fiscal Penal Code (KKS) if the unpaid amount is significant or if the tax office determines that the taxpayer intentionally avoided payment.
Tax fine (mandate penalty)
For minor offenses, a tax officer may issue a fine ranging from PLN 360 to PLN 7,200 (one-tenth to twice the minimum wage). This is often applied in cases where a taxpayer fails to pay a small tax amount but quickly settles the debt.
Court fine
For more serious or repeated offenses, the case may be referred to a court, which can impose fines from PLN 360 to PLN 72,000 (one-tenth to twenty times the minimum wage). Higher fines usually apply to cases of persistent non-payment, where the taxpayer deliberately and repeatedly avoids settling their tax obligations.
Criminal liability
If the unpaid tax amount is very large or involves deliberate tax evasion (e.g., failing to file tax returns, hiding income, falsifying documents), the offense may be classified as a fiscal crime. In such cases, penalties are much more severe:
- Fines can be calculated in daily rates, up to 720 daily rates, which can amount to millions of PLN in penalties.
- In extreme cases, imprisonment of up to 5 years may apply, and for organized tax fraud, the sentence can extend to 10 years.
Additional tax liabilities
In some cases, beyond interest and fiscal penalties, the law imposes additional administrative sanctions, such as:
- VAT penalties – If a tax audit reveals an understatement of VAT, the taxpayer may be charged an additional fee of 30% of the incorrectly reported tax amount.
- Failure to pay PIT or CIT advances on time – Repeated late payments can lead to additional penalties, especially if deemed intentional.
Enforcement actions
If the tax debt remains unpaid, the tax office may initiate enforcement proceedings, including:
- Bank account seizure – The tax office can order a freeze on the taxpayer's bank funds.
- Wage garnishment – For individuals, the tax office may require employers to withhold a portion of their salary to cover the tax debt.
- Property seizure – The tax authorities may place a forced mortgage on real estate or seize other assets.
How to avoid consequences of unpaid taxes?
If you know you won’t be able to pay your taxes on time, take action proactively. You can:
- Submit a voluntary disclosure (czynny żal) to avoid penalties.
- Apply for an installment plan or payment deferral to spread out the financial burden.
- Consider bridge financing to avoid fines and enforcement actions.
Don’t wait for the tax office to act – the sooner you respond, the better your chances of minimizing penalties.
Tax Enforcement and Legal Consequences
When a tax payment is significantly overdue and it becomes clear that it has not been settled voluntarily, the Tax Office initiates enforcement procedures to recover the debt. Tax arrears are considered public-law debts, and Polish law grants tax authorities broad powers to collect them, similar to those applied by the Social Insurance Institution (ZUS). Here’s what can happen if you fail to pay your taxes and ignore payment requests:
Payment Requests and Warnings
The process usually begins with an official payment request (reminder) sent by the Tax Office, specifying the amount due (tax + interest) and granting a 7-day deadline to settle the obligation. If the taxpayer still does not pay, the office issues an enforcement title and initiates enforcement proceedings.
Bank Account Seizure
Similar to ZUS, the Tax Office has the right to seize funds in the debtor’s bank account. The bank is obligated to transfer the funds to the tax authorities to cover the tax debt. The taxpayer becomes aware of this only when their account is partially or completely frozen. This can be disastrous for a company’s cash flow, as a sudden lack of access to funds prevents payroll and supplier payments.
Wage and Receivables Garnishment
If the debtor is a salaried employee, the Tax Office may order their employer to withhold a portion of their wages. In the case of businesses, the office may seize receivables—meaning that if a client owes the debtor money for an invoice, the tax authorities may order them to transfer those funds directly to cover the tax debt. The office can also redirect tax refunds or overpayments toward the outstanding debt.
Seizure of Movable and Immovable Assets
Tax authorities have the right to seize movable assets (e.g., equipment, inventory, vehicles) and real estate owned by the debtor to repay the debt. Bailiffs may visit the business premises (or home, if the debtor operates as a sole proprietorship) to identify valuable assets and issue a seizure decision. As a result, the seized items may be sold at auction. Some exceptions exist—tools essential for work up to a certain value and basic household items are partially protected—but most business assets are subject to enforcement. The office should choose the least burdensome enforcement method, but in cases of significant debt, asset seizure is unavoidable.
Tax Lien
For debts exceeding a specified amount (e.g., PLN 5,000 or more), the Tax Office may impose a tax lien on the debtor’s movable assets or property rights. It is officially registered and, like ZUS liens, secures the tax claim. If the taxpayer owns valuable equipment or shares in another company, the lien may prevent their sale until the debt is repaid.
Compulsory Mortgage
The Tax Office may also request the establishment of a compulsory mortgage on the debtor’s real estate. This information is recorded in the Land and Mortgage Register, preventing the sale of the property without first settling the tax liability. In the event of a sale, the Tax Office has priority in claiming the owed funds.
License or Vehicle Seizure
In some cases, especially for excise or customs duties, tax authorities may even seize specific operational licenses or vehicle registrations. However, such cases are rarer and mainly apply to special taxes rather than standard PIT/CIT obligations.
Additional Consequences for Entrepreneurs
If the debtor operates as a limited liability company, the company’s tax arrears may become the personal liability of its management board members if the company lacks sufficient assets and no protective measures were taken (per Article 116 of the Tax Ordinance). For sole proprietors (JDG), there is no legal separation between the business and the individual, meaning the entrepreneur is fully liable with all their assets. This means the Tax Office can seize personal bank accounts, savings, vehicles, or other personal assets—even jointly owned marital property (with some limitations).
Enforcement Costs
Similar to ZUS, tax enforcement incurs additional costs, increasing the total debt amount. These include:
- Enforcement fees (a percentage of the collected amount),
- Storage costs for seized assets,
- Auction organization costs.
Impact on Creditworthiness and Debt Registry
When a tax debt reaches the enforcement stage, it may be reported to credit information agencies or debt registers, reducing creditworthiness. Additionally, if legal proceedings (e.g., a fine for a tax offense) have been initiated against the taxpayer, this information may be recorded in their records. Furthermore, public procurement regulations allow for the exclusion of companies from tenders if they have tax arrears (similar to ZUS debts).
Summary of Tax Enforcement and Legal Consequences
The Tax Office has extensive powers to enforce tax arrears and will act if the taxpayer does not pay voluntarily. In extreme cases, one can lose control over their finances and assets. Therefore, a proactive approach to tax obligations is crucial. In the next section, we will discuss what to do if an arrear has already arisen and how to avoid the most severe consequences.
Delayed Tax Advance Payment – What Now?
Let’s assume you find yourself in a common situation: “I didn’t pay my PIT advance on time. What can I do?” Many entrepreneurs, especially sole proprietors (JDG), pay income tax in the form of monthly or quarterly advances. If one of these is missed, don’t panic—but act quickly. Here are steps and options for those who haven’t paid their tax advance or have unintentionally underpaid:
Pay as Soon as Possible (Even If Late)
The first step should be settling the overdue tax as soon as possible, even if the deadline has passed. Every day counts in limiting accrued interest. The longer you delay, the higher the interest accumulates and the greater the risk that the Tax Office considers the delay as “persistent” tax evasion.
When making the payment, include the accrued interest for the delay. The website podatki.gov.pl provides an interest calculator, or you can calculate it manually. Sometimes, a quick payment can make the difference between only paying interest and receiving an official penalty. For example, if a PIT advance was due on the 20th but is paid on the 25th with interest, the issue is usually resolved with just interest charges.
Submitting a ‘Voluntary Disclosure’ (Czynny Żal)
If the payment was delayed or you realized you underpaid, you can submit a ‘voluntary disclosure’ to the Tax Office. This is an official procedure where you proactively report your mistake (before the office detects it) and then correct it. In the letter, you explain the situation, e.g.:
“I failed to pay the VAT advance for September on time due to oversight. I have now settled the arrears with interest.”
However, the key is actually settling the overdue tax, as voluntary disclosure only works if a real effort is made to rectify the issue. In Poland, the law stipulates that if a taxpayer voluntarily reports and corrects a violation, they may avoid financial penalties or tax-related criminal liability. However, voluntary disclosure is only effective before the Tax Office initiates an investigation or enforcement proceedings—so submit it as soon as possible.
Contact the Tax Office
If you know the payment will be late or has already been missed due to temporary financial difficulties, it’s worth contacting the Tax Office—by phone, email, or in person. In some cases, if the delay is a one-time occurrence and you demonstrate good faith, the office may waive penalties, especially if the tax is quickly settled. While the Tax Office is seen as a strict institution, it is staffed by people, and formal procedures exist to grant some flexibility in exceptional situations.
Installment Plan (Tax Payment in Installments)
Similar to ZUS, it is possible to apply for an installment plan at the Tax Office. According to Article 67a of the Tax Ordinance, a taxpayer may request to pay off tax arrears in installments (or even future tax liabilities to prevent arrears). The application must present the financial situation and propose a repayment schedule.
If the office approves:
- Interest may be reduced (a deferral fee, often amounting to 50% of the standard arrears interest rate).
- The taxpayer gains more time to settle the obligation (e.g., several months instead of a lump-sum payment).
- The tax office will suspend enforcement actions as long as the taxpayer makes payments on time.
Note: If the arrears are high, the office may require security or a guarantee (e.g., a mortgage or surety), but this is not commonly applied to small businesses.
The approval process may take weeks or months and is not guaranteed—you must provide strong justification (e.g., the bankruptcy of a major client affecting the company’s cash flow). It is also crucial to continue submitting tax declarations during the decision process, even if payment is not yet possible—failing to submit declarations along with missed payments is viewed much more negatively by the office.
Deferral of Tax Payment Due Date
Another option under Article 67a of the Tax Ordinance is to apply for a deferral of the tax payment due date. This involves a formal request to postpone the payment date, for example, by a few months. It can be useful if you expect incoming funds soon (e.g., investment, seasonal sales increase).
During the deferral period, the taxpayer is not considered in arrears but may be required to pay a deferral fee. By the deferred due date, the tax must be settled, or an installment plan must be requested. Although deferrals are granted less frequently than installment plans, they are approved in exceptional cases.
Negotiations and Tax Advisory
If you missed an advance tax payment due to a miscalculation or a drop in income, consulting a tax advisor is advisable. Sometimes, there are legal ways to reduce current tax obligations, such as by correcting declarations. An advisor can also assist in negotiating with the tax office regarding reliefs or debt restructuring.
Tax Financing
If you cannot settle tax arrears from your own funds and the tax office rejects other solutions, external financing may be an option. Possible solutions include:
- Short-term tax loan – Quick financing to cover tax arrears. Funds can be available within 24–48 hours, and the decision is based on the company’s revenues or issued invoices, minimizing formalities.
- Factoring – Fast access to cash based on issued invoices, helping maintain liquidity and meet tax obligations on time.
Although financing incurs costs (interest and fees), it is often a better option than tax arrears' consequences—high interest rates or fines. Solutions like PaveNow, which provide quick financing for tax liabilities, can help avoid these issues and manage them flexibly.
Act now – avoid tax problems
Delaying your income tax prepayment may seem like a minor issue, but its consequences grow with each passing day. Interest charges, financial penalties, and enforcement actions can threaten your company’s cash flow. However, you have access to solutions that can help you avoid serious repercussions.
Tax regulations allow you to take advantage of relief options such as installment plans or payment deferrals. You can also explore external financing to quickly settle your obligations and avoid additional costs. The key is to act quickly and choose the best solution for your situation.
Don't wait until the problem escalates – take action now:
✔ Contact the tax office to discuss the possibility of installment payments or a deadline extension.
✔ Consult a tax advisor to find legal ways to reduce your tax liabilities.
✔ Consider short-term financing if you need immediate funds to cover your tax obligations.
Keeping up with your tax payments is not just a legal requirement – it’s crucial for your company’s stability and future growth. If you need financing to settle tax arrears, contact us – we’ll help you maintain financial balance and avoid tax-related issues.
