SAC on deadline for correcting the VAT amount and on appealing against implicit tax assessments

In a recent judgment, the Supreme Administrative Court (SAC) held that it is possible to correct the VAT amount within three years of the end of the taxable period in which the tax liability arose, whereas it is not possible to appeal against implicit tax assessments.

A taxpayer has filed additional VAT returns for several quarterly taxable periods from 2011 to 2013 in which the entity reduced the originally-reported value of effected taxable supplies to zero to correct the tax amount. These additional VAT returns were filed in connection with parallel tax proceedings concerning personal income tax. Within these proceedings, the tax authority reclassified the income initially regarded as supplies effected within the economic activity to income from dependent activity (employment). The taxpayer disagreed with the tax authority’s conclusions. However, to avoid the expiration of the appropriate VAT taxable periods, the taxpayer filed the above additional VAT returns along with an explanatory letter expressing its objections against the reclassification and challenging the VAT amount asserted in the filed additional VAT returns. 
 
Deadline for correcting the VAT amount
 
The SAC declared that it is possible to correct the VAT amount within the three years of the end of the taxable period in which a duty to declare VAT on the original supply arose. Within these three years, it is necessary to issue a corrective tax document (which must be delivered to the other party, or to make a correction in the VAT records) and to file an additional VAT return. The SAC’s judgment also comments, among other things, on a disputable taxable period involving the first quarter of 2011, which ended on 31 March 2011. The three-year period therefore expired on 31 March 2014. Until that date, when correcting the VAT amount pursuant to Section 43 of the VAT Act, it had been necessary to file an additional VAT return. According to the SAC, the deadline for correcting the tax amount pursuant to Section 43 of the VAT Act differs from the deadline for correcting the tax base pursuant to Section 42 of the VAT Act. The SAC’s extended panel of judges is currently discussing the deadline for correcting the tax base pursuant to Section 42 of the VAT Act in another case. We will keep you informed about any developments in this matter.
 
Appeal against implicit tax assessment
 
In its judgment, the SAC also opined on the possibility to file an appeal against an implicit tax assessment, i.e. when the tax administrator agrees with the tax asserted by the taxpayer and does not issue a tax assessment. The SAC concluded that no appeals can be filed in such cases. However, if, after additional tax returns have been filed, the tax administrator initiates a procedure to remove doubt (or subsequently a tax inspection ), an appeal is admissible even if the additionally-assessed tax in the tax assessment does not differ from the tax asserted by the taxpayer in an additional tax return. 
 
The SAC concluded that where taxpayers have a chance to challenge the asserted tax by filing additional tax returns, they may not challenge their own tax assertion by submitting an appeal along with the tax return forms. 
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