Extended panel of the Supreme Administrative Court to rule on deadline for filing additional tax return for lower tax liability
In its recent judgment, the Supreme Administrative Court again dealt with the possibility of filing additional tax returns in situations where subjective deadlines had elapsed. What is the consequence of non-compliance with subjective deadlines, and is it at all relevant that the tax is being reduced by the additional tax return? These are the questions that now an extended panel will have to decide on.
Under the Tax Procedure Code, the deadline for filing an additional tax return ends on the last day of the month following the month in which the discrepancy was ascertained. This is a subjective deadline. At the same time, an additional tax return can only be filed if the objective deadline, i.e. the deadline for assessing the tax, has not yet elapsed.
The Supreme Administrative Court previously commented on the consequences of non-compliance with the deadline for filing an additional tax return in relation to an additional reduction of the tax liability. The case law consistently implies that in such a situation, the subjective deadline is preclusive, i.e., that once the deadline elapses, the taxpayer’s right to file an additional tax return for a lower tax expires; therefore, they lose their right to claim a tax overpayment refund.
However, the second panel of the Supreme Administrative Court came to a different conclusion when dealing with a case of late filing of an additional tax return for a lower tax (Judgement No. 2 Afs 363/2019). According to this panel, only the general objective deadline for determining the tax applies to such filings (normally three years from the end of the deadline for filing a regular tax return). Once it expires, it is no longer possible to change the tax.
The second panel justified its conclusion primarily by arguing that the rules governing taxpayers’ obligations should be also applied mutatis mutandis to their rights. If the tax liability is being increased, the obligation to file an additional tax return does not end at the end of the subjective deadline: the obligation continues, and filings after the deadline are subject to penalties. If the tax liability is being reduced, no sanctions can be imposed, as it is taxpayer’s right to file an additional tax return and not their legal obligation. The second panel of the SAC also emphasised that the Tax Procedure Code does not contain any provisions stating that the right would cease to exist upon the elapse of the subjective deadline, neither can anything to this effect be inferred from other provisions. For this reason, the judges considered the interpretation that the subjective deadline concerning an additional tax return for a lower tax was preclusive to be disproportionate – in particular on the grounds that if an additional tax return is being filed for a higher tax, the taxpayer’s obligation does not end upon the expiry of that deadline.
Further arguments were put forward by the second panel as it dealt with what should be the legal consequences of non-compliance with the subjective deadline when reducing the tax liability. In view of the current wording of the Tax Procedure Code, the only possible consequence could actually be the extinction of the right to file an additional tax return. However, that conclusion cannot stand, as the logical interpretation beyond the simple wording of the law cannot curtail a taxpayer’s rights ensuing from the simple interpretation. The panel also stressed that the current interpretation goes against the main objective of tax administration – the correct determination and assessment of tax.
The second panel concluded that the failure to observe a subjective deadline when tax is being reduced by an additional tax return has no legal consequence. Since this conclusion departs from previous case law, the dispute will be decided by an extended panel of judges of the Supreme Administrative Court.