As arises from the judgment of the Supreme Administrative Court of 25 September 2015 (case no. I FSK 563/14), the Minister of Finance may change a tax ruling issued as a result of a final and non-appealable judgment of an administrative court.
A company asked for a tax ruling in a case concerning VAT. In the application it requested the authority to confirm the tax rate applicable to the supply of a medical device together with its installation and adaptation works. According to the applicant, both the supply of medical devices and the related assembly and adaptation works should be, as a package of services, subject to the preferential rate of 7%.
The Head of the Tax Chamber in Warsaw, in his tax ruling of 14 July 2009, considered that the company’s position is incorrect. According to the authority, though the performance of construction and assembly works is related to the supply of a medical device and is intended to ensure correct and safe work of the product, it may not be assumed that such services constitute an element of a comprehensive performance, namely the supply of a medical device.
The Provincial Administrative Court in Warsaw reversed the tax ruling on appeal and acceded to the Company’s position. As a result of the incorrect specification of the grounds of the cassation, the Supreme Administrative Court dismissed the authority’s cassation appeal. As a result of a final and non-appealable judgment of the Provincial Administrative Court, in 2010 the Minister of Finance issued a tax ruling in which it considered the Company’s position correct.
In the same period the judicial practice of administrative courts became more consistent, as based on the ECJ case law the courts differentiated between adaptation works subject to the base VAT rate and the supply of a medical device subject to a preferential rate.
Then in 2012 the Minister issued a ruling amending the abovementioned tax ruling, in which it stated that the Company’s position is incorrect. The Provincial Administrative Court reversed the change of the ruling and pointed out that in a situation where a taxpayer obtained a tax ruling confirming its position and the ruling was issued in performance of an administrative court judgment, the Minister of Finance, acting within the scope of its competences set forth in Art. 14e § 1 of the Tax Ordinance, could not change that ruling ex officio. According to the court, pursuant to Art. 170 of the Law of Proceedings before Administrative Courts, the Minister was bound by the final and non-appealable judgment. It means that a tax ruling of 2010 confirming the Company’s position presented in the application for the tax ruling and implementing the guidelines contained in the final and non-appealable judgment issued in the case, is valid in the system of legal transactions.
However, the Supreme Administrative Court reversed the judgment of the Provincial Administrative Court, as the Tax Ordinance does not provide for any possibility to change a tax ruling issued as a result of a court judgment. Provisions of the Law of Proceedings before Administrative Courts on the binding force of an administrative court judgment are not applicable to this case, as a changed tax ruling is a new case. Additionally, the trial court did not examine material prerequisites of the change of the tax ruling in this case, though a new judicial practice has already been established.
The scopes of application of provisions of Art. 14e and 170 of the Law of Proceedings before Administrative Courts are different and concern different situations. No possibility to change a tax ruling issued as a result of a final and non-appealable administrative court judgment would lead to a breach of a constitutional principle of equal justice under law. If a judicial practice different from the one arising from a tax ruling which is not subject to a change is established, a taxpayer would actually enjoy a tax privilege not expressly envisaged in tax law.
The discussed judgment is a precedent one, as courts had never before dealt with this issue. It follows from the judgment that the fact of issuance of a judgment concerning a tax ruling does not exclude the possibility of its amendment. However, the amendment would still be subject to court inspection in terms of existence of certain prerequisites (in particular taking into consideration the judicial practice of courts, the Constitutional Tribunal or the ECJ). Additionally, until a tax ruling is changed, a taxpayer may adhere to it and enjoy protection it provides. Therefore, immediate adherence upon the receipt of the ruling is worth considering.