Case law
12 October 2016

SAC: Tax administrators have to obtain a key witness statement

Has the tax administrator challenged the delivery of supplies or services on the grounds of your supplier being uncontactable? The Supreme Administrative Court in its recent judgment confirmed that the tax authority has to make all efforts and use all procedural means to ensure the hearing of a taxpayer’s witness whose statement is of key importance to support the existence of supplies.

Jana Pytelková Svobodová
Martina Valachová

In Judgment No. 4 Afs 32/2016-40, the court dealt with the approach of a tax administrator who had challenged the tax deductibility of expenses incurred on intermediary services rendered by an ‘uncontactable supplier’. The taxpayer proposed that a witness be heard and provided the tax administrator with a telephone number and address. The witness, although not a fictitious person, managed to avoid all contact attempts. The tax administrator requested that the witness’s local tax authority obtain the statement. Even though the witness had previously promised to do so over the phone, he did not show up to give a statement. Hence, the tax administrator made no further attempts to hear the witness and concluded that the taxpayer had failed to bear the burden of proof.

The SAC found the approach of the tax authority unacceptable. If a taxpayer proposes a witness statement that may be of key importance, and if such a witness is neither fictitious nor impossible to find, the tax administrator is obliged to make all efforts to obtain such a witness statement. Requesting another tax authority to hear the witness does not liberate it from this duty.

Tax authorities often take a rather lax approach to obtaining statements from uncooperative witnesses and do not use all legal possibilities available to them, such as having the witness brought in by the police. In such situations, it is necessary to actively request that the witness statement be obtained. The above judgment may be useful to support this.

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