I am often asked about when tax liabilities are redeemed by statute of limitations and I usually understand that people have heard that the statute of limitations is 5 years and the following calculation is made “2008 +5 years = 2012”, i.e. concluding that “… by the end of 2012, the statute of limitations will expire … “.
As the title implies, the calculation of the statute of limitations period is a bit tricky.
The general rule states that public debts are redeemed upon the five-year statute of limitations period expiration, but considering since 1st January of the year, following the year when these should have been paid. For example, if a company has an unpaid debt for corporate tax for fiscal 2008, the tax had to be paid up to 31st March 2009. In this case, the 5-year statute of limitations period starts since 1st January 2010, and respectively the tax debt tax for 2008 shall be redeemed by statute of limitations as if 1st January 2015.
In some statutory regulated cases, the statute of limitations stops or is interrupted, which can lead to longer period altogether.
Regardless of eventual stops and interruptions, if more than 10 years passed, the tax liability is redeemed by statute of limitations (as the 10-year period is determined again by following the above mentioned rule for the starting date). However, even this is not the final limit – if the tax liability is deferred or rescheduled, the total duration of the statute of limitations period might exceed 10 years.
In other words, the “5-year” statute of limitations period actually lasts for at least 7 years and may exceed 10 years since the moment of occurrence of the respective liability.