Service of Enforcement Title as a Precondition for Valid Seizure

Provincial Administrative Court in Łódź, Judgment of February 28, 2023 (I SA/Łd 745/22)

Tax authorities in Poland possess a five-year limitation period within which to pursue fiscal obligations. The statutory framework, however, furnishes these authorities with numerous instruments to extend this temporal boundary—among them, the application of enforcement measures against the taxpayer. In a judgment of considerable significance for taxpayers, the Provincial Administrative Court in Łódź held that failure to serve the enforcement title upon the obligor precludes the commencement of valid enforcement proceedings and, consequently, cannot produce the legal effect of interrupting the limitation period (case no. I SA/Łd 745/22).

I. The Rationale of Limitation Periods in Tax Law

The Constitutional Tribunal, in its judgment of July 17, 2012 (case no. P 30/11), articulated the foundational purpose underlying limitation provisions in tax law: to guarantee taxpayers that, following the expiration of the statutorily prescribed period, they shall not be exposed to any actions by tax authorities aimed at determining or enforcing tax liabilities:

“The enforcement of tax debts and the attendant uncertainty regarding the status of tax obligations cannot persist for decades.”

The actual practice of fiscal authorities, however, diverges considerably from this constitutional standard.

II. Instrumental Conduct by Tax Authorities: Empirical Evidence

According to a 2019 report encompassing data disclosed by six tax audit offices for the period 2008–2014, the initiation of criminal proceedings against taxpayers during ongoing audit procedures was associated with tax obligations approaching the limitation deadline in 91% of cases. Remarkably, 70% of such proceedings were commenced in the final quarter of the calendar year—a pattern strongly suggestive of strategic timing.

Despite the passage of time, the practice of instrumentally initiating criminal and fiscal criminal proceedings to extend limitation periods has remained substantially unchanged. This conclusion finds support in the Supreme Administrative Court’s decision to address this matter definitively in 2021.

The Supreme Administrative Court Resolution of May 24, 2021 (I FPS 1/21)

In a resolution adopted by a panel of seven judges, the Supreme Administrative Court instructed that administrative courts may and should assess whether the initiation of criminal or fiscal offense proceedings in cases before them was artificial in character—that is, undertaken solely to prevent the commencement or to suspend the running of the limitation period.

This resolution constitutes an essential point of reference for taxpayers challenging fiscal authority actions in tax litigation.

III. Factual Background of Case I SA/Łd 745/22

In December 2016, the Director of the Tax Chamber in Łódź determined the entrepreneur’s value-added tax liability for September 2009 at approximately PLN 16,000. The entrepreneur raised the defense of limitation, arguing that interruption of the limitation period could not have occurred in his case based on the ground specified in Article 70 § 4 of the Tax Ordinance Act.

The Operative Provision: Article 70 § 4 of the Tax Ordinance

This provision stipulates that the running of the limitation period is interrupted by the application of an enforcement measure of which the taxpayer has been notified. Following such interruption, the limitation period recommences from the day following the day on which the enforcement measure was applied.

The Taxpayer’s Contentions

The entrepreneur maintained that notification of the enforcement measure had never been effectuated:

• there existed no evidence of service of the enforcement title upon him;
• the receipt for payments accepted by the enforcement authority was formally defective.

IV. Procedural History

Initial Judgment of the Provincial Administrative Court (May 24, 2017)

Upon first examination, the Provincial Administrative Court in Łódź dismissed the taxpayer’s complaint, essentially replicating the authority’s position regarding effective application of the enforcement measure.

Supreme Administrative Court Judgment (May 17, 2022, I FSK 1529/17)

The Supreme Administrative Court vacated the lower court’s judgment and remanded the case for renewed consideration. In its reasoning, the high court emphasized that the provincial court had:

• failed to address the fundamental ground of the complaint—the interruption of the limitation period predicated upon application of an enforcement measure;
• declined to evaluate the enforcement title in the case file that lacked the debtor’s signature;
• treated superficially the problematic issues that were determinative of the case outcome.

The Supreme Administrative Court directed that, upon reconsideration, the court of first instance should formulate a legal assessment regarding the effectiveness of enforcement proceedings initiation and application of enforcement measures in relation to interruption of the limitation period.

V. The Provincial Administrative Court’s Determination Upon Remand

The Prerequisite for Enforcement Measure Validity

The court recalled the regulation contained in Article 26 § 5(1) and (2) of the Administrative Enforcement Proceedings Act, pursuant to which administrative enforcement commences upon:

1. service upon the obligor of a copy of the enforcement title, or
2. service upon the debtor of a seized claim of notice regarding seizure of a claim or other property right.

The court emphasized that, inasmuch as the authorities invoked application of an enforcement measure in the form of seizure of money held by the obligor (where no third-party debtor of a seized claim was involved), enforcement could commence exclusively in the manner prescribed by Article 26 § 5(1)—upon service of a copy of the enforcement title upon the obligor.

Analysis of the Receipt and Enforcement Title

The court further referenced Article 68 § 1 of the Enforcement Act (in its version effective prior to repeal on July 30, 2020), which provided that where the obligor pays the claimed monetary obligation upon the fiscal collector’s demand, the collector issues a receipt for the money received.

The case file contained a receipt; however, the circumstances did not indicate that it was issued within enforcement proceedings as a consequence of applying an enforcement measure. In an annotation to the enforcement title, the Head of the Tax Office confirmed that on January 10, 2013, the taxpayer made three payments toward specified tax arrears, which did not cover them in full.

Critical Findings of the Court

The court compared the receipt against the contents of the enforcement title and determined:

• the first page of the enforcement title bore strikethrough marks (double lines both vertical and horizontal);
• the second page, in the “confirmation of receipt” section, contained the date January 24, 2013, together with the fiscal collector’s stamp and signature;
• the section designated “legible signature of the obligor” remained blank.

The court inferred from these circumstances that the enforcement title was not served upon the taxpayer. This conclusion cohered with the finding that the taxpayer made his payments on January 10, 2013—that is, prior to service of the enforcement title upon him (which was issued on January 11, 2013).

The Court’s Conclusion

Given these circumstances, the Head of the Tax Office lacked grounds after January 10 to issue an enforcement title for the same obligations. If he nonetheless issued one, it was done erroneously—a fact of which the authority was apparently aware, as evidenced by:

• the strikethrough marks on the first page of the enforcement title;
• the absence of any notation regarding service upon the obligor.

The Provincial Administrative Court in Łódź vacated the challenged decision together with the preceding decision of the first-instance authority and discontinued the tax proceedings, holding that subsequent actions undertaken by the Head of the Tax Office could produce no legal effects—neither the effect of monetary seizure nor, consequently, the effect of interrupting the limitation period under Article 70 § 4 of the Tax Ordinance.

VI. The Holding

The Provincial Administrative Court in Łódź formulated the following holding:

“Where authorities invoke application of an enforcement measure in the form of seizure of money held by the obligor, no third-party debtor of a seized claim is involved; accordingly, enforcement could commence exclusively in the manner prescribed by Article 26 § 5(1) of the Administrative Enforcement Proceedings Act—upon service of a copy of the enforcement title upon the obligor.”

VII. Practical Significance

This judgment confirms that taxpayers may effectively defend against unauthorized actions by tax authorities regarding interruption of limitation periods. This assumes particular importance in light of the Supreme Administrative Court’s resolution of May 24, 2021, following which courts are obligated to examine ex officio:

• the propriety of criminal proceedings initiated against taxpayers by the authorities;
• the actual effectiveness of enforcement measures deployed against them.

Key Practical Conclusions

The judgment establishes that:

1. Mere issuance of an enforcement title does not suffice to interrupt the limitation period.
2. Service of the enforcement title upon the obligor constitutes a conditio sine qua non for enforcement measure validity.
3. The absence of the obligor’s signature in the receipt confirmation section may constitute evidence of non-service.
4. All enforcement actions undertaken prior to service of the enforcement title are legally ineffective.

VIII. Defensive Strategies Against Fiscal Authority Actions

In matters concerning limitation of tax obligations, detailed analysis of case files assumes critical importance with respect to:

• proper service of the enforcement title;
• the chronology of events (payments versus issuance and service of the title);
• formal correctness of enforcement documentation.

Taxpayers who declined to pursue disputes with fiscal authorities under analogous circumstances may have been burdened with obligations that had, in reality, become time-barred. Effective representation before administrative courts, however, demands specialized knowledge and substantial experience in tax litigation.

Robert Nogacki

Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.