Appeals proceedings: How long may it take?

The most important deadline in tax proceedings is the time limit for the assessment of tax. Its course therefore has a major impact on the appeals proceedings, as the entire tax proceedings ends when the decision on the appeal is issued. The appellate authority must be able to issue a decision on the appeal within this time limit. If that time limit expires during the appeals proceedings, the appellate authority is obliged of its own motion to discontinue the proceedings and annul the decision of the first-instance tax authority. If this happens, the proceedings ends without the case itself being examined and the tax being assessed. Where the case spans several periods, the time limit shall be assessed separately for each period.

The financial administration bodies are well aware of the importance of this deadline and have set up automatic mechanisms to monitor its course. However, the mechanism for monitoring deadlines is not always flawless. Moreover, despite numerous relevant case law, there are still a number of unresolved issues related to the tax assessment time limit. We therefore recommend always checking whether it might be possible to argue that the time limit has already expired and that the tax therefore cannot be assessed. Same as the appellate authority, the court should also examine the expiry of the time limit for the assessment of tax ex officio, but it is also true here that the law aids the vigilant. We recommend that the court or the appellate authority be notified of the expiry of the time limit, including statement of grounds.

However, it is not just the time remaining for the assessment of tax that affects the duration of the appeals proceedings. To standardise the length of the appeals proceedings at least partially, the Ministry of Finance has issued Instruction No. MF-5 on the determination of time limits in tax administration, which provides that the time limit for issuing a decision on an appeal is six months from the date of receipt of the appeal. However, this is not a final time limit but rather a standard time limit, as its running may be affected by certain factors that may suspend or extend it. In our experience, the appeals proceedings in practice take about a year, often longer if the time limit for tax assessment permits so. The Supreme Administrative Court has held in this respect that the six-month time limit for deciding on an appeal is legally binding on the administrative authorities: they cannot deviate from it; otherwise, such a procedure would be impermissibly arbitrary. However, failure to comply with that time limit does not result in the appeals proceedings being discontinued or the decision of the first-instance tax administrator being annulled, nor does it result in the subsequent decision of the appellate authority being unlawful.

We will look at how to effectively defend against the tax authorities' inaction and overly long proceedings in the next issue of Tax and Legal Update.