The company timely transferred income tax to the budget, but later received a tax claim from the tax authorities. As it turned out, the payment order indicated the wrong invoice for paying the tax. The payment was sent to another budget account. This led to the appearance of income tax debt. How to fix the error?
Legal basis
The mechanism of settlement of this issue is provided by Art. 43 of the Tax Code of Ukraine (hereinafter – TCU) and the Procedure for Information Interaction of the State Fiscal Service of Ukraine, its territorial bodies, the State Treasury Service of Ukraine, its territorial bodies, local financial bodies in the process of refunding to the taxpayers erroneous and/or overpaid amounts of monetary obligations and penalties, approved by order of the Ministry of Finance of Ukraine No. 60 of February 11, 2019 (hereinafter – Order No. 60).
In the general case, wrongly paid tax is payable to the payer under two conditions which are absence of tax debt and submission by the payer of the application.
Condition 1. The taxpayer does not have tax debt
In our case, due to the incorrect transfer of funds, the payer incurred tax debt for income tax. In this case, there can be no question of returning erroneously paid funds to the payer's account until the payer has paid off this tax debt in full.
The payer has least two ways to pay off tax debt:
- pay the tax a second time, but already to the correct account, and as soon as the debt is closed – to return the wrongly transferred funds to your bank account;
- carry out the transfer of the misallocated funds to repay the debt from the required tax.
Both methods have their advantages and disadvantages.
The first method seems more costly to the payer, since you have to pay the tax twice. However, this will only take one day, and this will already secure a larger penalty for late payment of tax, the amount of which depends on the number of days of late payment.
Remember: tax debt is considered not only the amount of unpaid amounts by the taxpayer within the fixed term of the tax liability, but also the amount of penalties from this tax and the fine accrued to integrated payer card (hereinafter – IPC) (subitems 14.1.39, 14.1.175 of the TCU). Therefore, it is necessary to immediately transfer a larger amount, including penalties and fines. Only after this issue has been resolved a claim can be made for a refund of the incorrectly transferred funds.
The second method makes it possible to use the wrongly paid funds to pay off the debt, but it will have to wait for the transfer of these funds for about a month (item 43.5 of the TCU).
So, if the payer wants to repay the amount of money wrongly paid into the wrong account, but he has a tax debt, then he must first repay the debt, and then return the money. Alternatively, erroneous funds can be credited immediately to pay off the debt.
Condition 2. Filing of the application by the taxpayer
The application is submitted in an arbitrary form to the State Tax Service (hereinafter – STS) at the place of accounting of the mistake and/or excess of the paid amount within 1095 days from the date of its occurrence (item 43.3 of the TCU). Please note that the above procedure does not cover the return and transfer of payments such as value added tax (hereinafter – VAT) and the single social contribution (hereinafter – SSC). Different rules are applied to the latter.
The application should indicate one of the ways in which funds are transferred (item 43.4 of the TCU):
- to the taxpayer’s current account at the bank institution;
- to repay the monetary obligation and/or tax debt from other payments, the control of which is entrusted to the controlling authorities, regardless of the type of budget;
- cash back by check (in the absence of a bank account taxpayer).
In addition to the application, the payer may submit a copy of the payment document for the carrying out of which the erroneous and/or excess payment was transferred to the budget.
It’s no good in delaying the submission of the application, because the funds are refunded in case 1095 days have not expired since the occurrence of erroneous and/or overpaid payments. If these amounts are credited to the IPC for more than 1095 days without movement (there are no reductions and accruals or zero accruals and payments), then in the absence of a payer's request for repayment of such amounts, the unit that records payments and other proceeds, based on the decision of the head or deputy head of the STS body, debits them to the budget.
If the payer submits an application for offsetting overpayment from one tax to another, the taxpayer's refusal to do so is groundless. The TCU does not set a deadline for the payer to exercise the right to reduce the tax liability from the corresponding payment to the amount of overpayment from another payment. The implementation of such a transfer complies with the requirements of item 87.1 of the TCU. And item 102.5 of the TCU, which is used by the tax authorities as a reason for refusing to pay overpayments, only regulates the procedure for the refund of overpaid monetary liabilities and the refund of VAT amounts, and does not apply to offsetting overpaid tax payments by paying off other tax liabilities.
