How amounts that would otherwise be refunded are used on unpaid taxes
This guidance contains information about how taxpayers’ refund balances are applied on their unpaid taxes.
The guidance applies to refunds of the following tax types:
Information for individuals and the self-employed can be found here: Tax refunds used for paying taxes (individual taxpayers).
Read more about how unused credit is refunded: Refunding an unused payment.
How are refunds used on unpaid taxes?
If you have unpaid taxes, your tax refund is used to pay them. The oldest unpaid taxes with the earliest due dates are paid first. However, if you receive a refund of self-assessed taxes, this refund is primarily used on overdue self-assessed taxes. For example, you may receive a refund due to negative VAT.
If you have made a payment arrangement with the Tax Administration, the refund is first used on other taxes not included in the arrangement, and only used on the taxes included in the arrangement when all the other taxes have been paid.
Refund is not used to pay taxes before their due dates.
You cannot decide which of your unpaid taxes your tax refund is used to pay. Go to MyTax to see which taxes your refund has been used on. See instructions: How to see whether your tax refund has been used for payment of taxes
Whose taxes can be covered by the refund?
The refundable balance can be applied on the taxpayer’s unpaid taxes, or on taxes that the taxpayer is responsible for (e.g. if the taxpayer is a shareholder in a partnership). How and when refundable balances are applied depends on the type of tax that the refund is for.
A refundable amount may be left over from corporate income tax and VAT or other self-assessed taxes.
The recipient of the refund will always be notified if their refund has been used to pay taxes. For example, there will be a notification in your tax summary. You receive the summary by post and in MyTax. If you use Suomi.fi messages, you only receive the summary in MyTax. Read more about the summary.
In addition, if you have any debts in enforced recovery, your tax refund may be used to pay them. In this case, you will be notified by the enforcement authority.
If a corporate taxpayer is going to receive a refund of income tax, but the corporation also has unpaid taxes that are overdue, the Tax Administration will use the refund on the overdue taxes in order from oldest to newest according to their statute dates. The refund is used first on taxes that are not included in a payment arrangement.
When are tax refunds used for tax payment?
The taxpayer’s tax refunds are not used for covering unpaid taxes, if those taxes relate to arrangements with dates of application from 21 April to 31 August, which are currently in effect with the eased terms.
Read more: Corona situation: Payment arrangements up to 31 August were available under easier terms.
Tax refunds are not used to pay taxes before their due date. Refunds are only used on taxes that have already fallen due or that are due on the current date.
The Tax Administration may use a corporate taxpayer’s refunds on unpaid taxes immediately on the end date of its tax assessment. Every corporate taxpayer has its own end date for tax assessment. This date is printed on the tax decision. However, the end date is never later than 10 months from the end of the final calendar month of the corporations’ accounting period.
Tax refunds may be used to pay overdue taxes up until the 18th of the following month. This means that refunds can still be used to pay any taxes that fall due between the tax assessment end date and the 18th of the following month. If the 18th is not a business day, the time limit will end on the day before it, or on the previous day if that is a business day.
A corporate taxpayer’s tax assessment ends on 10 August. As a result of the assessment, the corporation is to receive a tax refund of €5,000. However, the corporation also has taxes they must pay: €1,000 of VAT falls due on 12 August, and €3,000 in prepayments falls due on 24 August 2020. The corporation does not pay either of these. The Tax Administration will therefore use the corporation’s refund to pay any unpaid taxes that fall due on or before 18 September. The refund is used to pay the VAT on 12 August and the prepayments on 24 August. After this, €1,000 of refund remains payable to the corporation.
A corporate taxpayer’s tax assessment ends on 7 July. The corporation is due a tax refund of €2,000. However, the refund may be used on taxes falling due until 18 August. The corporation should have paid €400 of real estate tax by 6 July, but did not do so. The Tax Administration will use a part of the refund on the overdue real estate tax on the tax assessment end date, 7 July. Late-payment interest relating to the late real estate tax is also paid from the refund amount.
The corporation should additionally pay €1,000 VAT by 12 July. On 12 July, the corporation sends the Tax Administration a payment of €1,000 using the reference number for self-assessed taxes. The purpose of this payment was to pay the VAT that falls due on that date.
Instead, the Tax Administration uses the refund balance to pay the VAT on 12 July, despite the VAT payment that the corporation made on the due date. The amount will either wait for any upcoming taxes to fall due, or alternatively, the Tax Administration may refund it to the corporation. The outcome depends on what settings the corporation had made in MyTax for its refund time and refund limit. Read more about how to set a refund time and a refund limit in MyTax.
How is a refund due to changes in income tax used?
Another possibility for a corporate taxpayer to receive a refund is a situation where the Tax Administration has adjusted the amount of income tax downwards, i.e. decreased the corporate taxpayer’s prepayments or back taxes. Situations like this might arise when a corporate taxpayer has claimed adjustment of its prepayments or back taxes at a time when it has already paid them. In these circumstances, due to the revised amount of tax to pay, the Tax Administration can apply a refund on the corporate taxpayer’s unpaid taxes immediately after the decision on refunding is made. The end date of the corporation’s tax assessment has no effect on these refunds.
A corporate taxpayer has been imposed €24,000 in prepayments. The payments fall due every month in instalments of €2,000. On 10 August, the corporation requests a change of its annual prepayments in MyTax. The corporation has already paid the instalments from January to July, €14,000 in total.
The Tax Administration approves the request on 14 August. The annual requirement of prepayments decreases to €12,000. Only the instalments from January to June will remain valid. This means that the corporation has paid €2,000 more than necessary.
The corporation should receive €2,000 as a refund of prepayments. However, they have unpaid VAT. The corporation should have paid €1,000 in VAT by 12 August. The Tax Administration uses the refund to pay the VAT and its late-payment interest on 14 August, which is the date when the decision on the refund of prepayments was made. What is left of the refundable amount will be paid into the corporation’s bank account a week later.
Companies may be entitled to a refund of self-assessed taxes if VAT becomes negative or if the amount of tax payable decreases after the company already paid it. You may also receive a refund if you have made a payment with the reference number for self-assessed taxes but the payment is left unused. The paid-in amount is returned to your company’s bank account if you request it in MyTax or if you have selected that refunds should be paid after the next general due date following the date of filing the return.
You can change the refund date in MyTax. Read more about VAT refunds and refunds of other self-assessed taxes.
Filing negligence prevents tax refunds
If you have not filed all the required tax information, you cannot receive any tax refunds. Your tax refunds are used to pay your overdue taxes up until you have filed all your tax returns. After that, the Tax Administration will refund any remaining amounts to you.
A corporation’s tax assessment ends on 28 August. Normally, the corporation’s tax refunds could be used on unpaid taxes until 18 September. However, the corporation has not filed all its VAT returns. Because of this filing negligence, the refunds will not be paid to the corporation. Instead, they will be used to pay a prepayment that falls due on 23 September.