SAC: Tax administrator’s authority to register taxpayers for VAT subject to time limit

In its decision 10 Afs 329/2016-55, the Supreme Administrative Court (SAC) confirmed that the tax administrator’s authority to register persons liable to tax as VAT payers by virtue of office is not time-unlimited, similarly as any other intervention of the state into the private sphere.

In December 2009, a taxpayer in a singular instance exceeded the turnover decisive for mandatory registration for VAT and, in compliance with legislation effective at that time, had to file an application for VAT payer registration by 15 January. The taxpayer did not exceed the turnover threshold again in the following years. As the taxpayer did not register for VAT, on 18 December 2013 the tax administrator ex officio registered the taxpayer as a VAT payer retroactively from 1 January 2013.

The taxpayer did not agree with the tax administrator’s course of action and claimed that the tax administrator had decided on the ex officio VAT registration more than three years after the statutory deadline for filing a VAT registration application. The tax administrator rebutted that the right to register a taxpayer for VAT by virtue of office was in principle not subject to any time limit. 

But the SAC found the tax administrator’s opinion to be unacceptable, unconstitutional and leading to absurd implications. Although the taxpayer undoubtedly had turned into a VAT payer by operation of law, the tax administration’s interventions in taxpayers’ tax rights and obligations must be time-limited. The SAC held that if the tax administrator fails to rectify an unlawful situation in time and within the statutory deadlines, no negative implications for the taxpayer should be deduced from the violation of the duty to register for VAT.

According to the SAC, the tax administrator’s authority to register a business entity as a VAT payer is time-restricted under Section 20 (2) of the Tax Procedure Rules. This time limit is very closely connected with the deadline for assessing tax. Only within this period must the taxpayer bear the tax administrator’s procedures and other acts. Hence, the start of the time limit is crucial in this respect. 

The SAC concluded that if the deadline for VAT registration expires, the taxpayer must be considered a person that has never been a VAT payer. The deadline for assessing tax is understood to be not just the period during which taxpayers may be subject to additional tax duties but also the only period during which the tax administrator may seek the fulfilment of the registration duty.

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