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What are other defence options in tax proceedings?

In previous articles, we described the standard way to defend against the tax administrator's decisions the taxpayer did not agree with. Czech law also offers other ways to remedy a tax administrator’s incorrect decisions. In the Tax Procedure Code, these are extraordinary legal remedies, i.e., reopening of proceedings and review proceedings. Moreover, against a final decision of the Supreme Administrative Court (SAC), a constitutional complaint can be filed.

Reopening of proceedings

Tax proceedings may be reopened at the taxpayer’s request or at the tax administrator’s initiative. In both cases, the tax administrator may reopen the proceedings only for reasons defined by law. These are mainly situations where, after a final and conclusive decision, new facts come to light or evidence emerges that the taxpayer could not have objectively submitted earlier. The tax administrator will also allow the reopening of proceedings if the original decision depended on the assessment of the preliminary question under the Tax Procedure Code, which was subsequently decided otherwise. Another reason for reopening can be the tax administrator deciding based on falsified evidence, or the issuance of a decision having been accompanied by the commission of a crime by the taxpayer (threat or bribe) or an official.

Review proceedings

Review proceedings are meant to change a decision issued by the tax administrator contrary to the law. These involve cases where tax administrators based their decision on legal opinions that were proven to be incorrect, e.g., when the SAC started to hold a different opinion in its new case law. The review proceedings may be conducted regardless of whether they are for or against the taxpayer. Thus, the outcome of the proceedings may not always be more favourable for the taxpayer than the original decision.

What both proceedings have in common is that they involve two stages: first, the tax administrator decides whether it is justified to reopen or review the proceedings, and only then the actual review takes place and the final decision about a tax liability is issued, taking into account the reasons that led to the reopening or review of the proceedings.

Constitutional complaint

It is also possible to challenge the final decision of the Supreme Administrative Court in cases where the taxpayer believes that the court has not considered their constitutionally protected rights. A constitutional complaint must be filed on behalf of the taxpayer by a lawyer within two months of the delivery of the SAC's judgment. A constitutional complaint may be successful especially where the tax administrator's efforts to collect the tax collide with fundamental rights and freedoms protected by the Constitution or the Charter of Fundamental Rights and Freedoms. This aspect was currently pointed out by the Constitutional Court in a well-known case involving the use of footage from road cameras of the Police of the Czech Republic in tax proceedings (File No. IV. ÚS 2621/22).