SAC’s landmark verdict on deadline for assessing tax
The extended chamber of the Supreme Administrative Court (SAC) has dealt with the conflict between the new and old legal regulation of tax assessment deadlines. The SAC opposes existing case law according to which the 10-year time limit for tax assessment for old taxes shall be suspended even if court proceedings were initiated after 1 January 2011 when the Tax Procedure Code was already in force.
In practice, we can still see cases dealing with the correctness of assessment of tax for 2010 and prior years. At that time, the Act on Administration of Taxes and Duties was in force, which did not contain comprehensive rules for calculating time. The Administrative Procedure Code was thus applied, providing that the deadline in which a tax administrator may assess tax shall not run during court proceedings. However, the Tax Procedure Code makes it clear that the time limit for assessing tax always ends ten years after its commencement, with court proceedings having no effect on this ten-year maximum.
The Tax Procedure Code contains transitional provisions that regulate the relationship between new and old legislation. Some courts, including the SAC, have held that the 10-year time limit for tax assessment shall be extended by court proceedings even if they were initiated after 1 January 2011 (when the Tax Procedure Code was already in force). Dealing with such dispute, the ninth chamber of the Supreme Administrative Court (SAC) wanted to depart from the SAC’s established case law; so they had no choice but to refer the case to the extended chamber for consideration.
Existing case law unconstitutional
In its November judgment No 9 Afs 95/2021, the extended chamber upheld the opinion of the ninth chamber. The extended chamber summarised that the Tax Procedure Code regulates the running of time limits fully and exclusively, and therefore the rules on time limits under the Administrative Procedure Code no longer apply in tax matters.
The transitional provision of the Tax Procedure Code clearly stipulates what legislation to apply as regards time limits for tax assessment. It states that the effects of legal events that occurred before the Tax Procedure Code entered into effect shall be assessed under the old legislation. It follows that if tax-related court proceedings were initiated before 31 December 2010, the 10-year maximum period for the tax assessment shall be suspended and not run during the court proceedings. Conversely, if court proceedings were initiated after 1 January 2011, the time limit rules under the Tax Procedure Code shall apply, and therefore the maximum possible length of the tax assessment period shall not be extended.
According to the extended chamber, the wording of the transitional provision of the Tax Procedure Code is unambiguous and the existing case law is unconstitutional as it contradicts the law, deforms it and puts taxpayers at a disadvantage. The tax administration has declared that they will follow the new legal opinion in their practice.