Case law
17 January 2018

SAC on international requests for cooperation and time limits for tax assessment

Effective 1 January 2014, pending international requests for cooperation extend the period for which a tax may be assessed by the tax administrator. The SAC has now dealt with the interpretation of the effect of this regulation in terms of time: Do international request procedures initiated in 2014 also extend the deadlines for tax assessment that started to run in prior years? Theoretical as it may seem, the SAC’s ruling on this question may lead to the termination of a number of pending tax inspections.

Viktor Dušek
Jana Fuksová

The international request procedure, serving Czech tax administrators to obtain information needed for tax administration from their foreign colleagues, can indeed be a time consuming process. And Czech tax administrators have no control of its duration. Therefore, in 2014, a new rule was introduced under which pending international requests suspend the deadline for assessing tax. The new regulation, however, did not contain any specific transitory provisions. It thus was not clear whether dispatching a request for international cooperation also extended deadlines that had already started to run before 2014. The financial administration believed that this was the case.

The SAC dealt with a case of a tax inspection for 2010 and 2011, initiated in 2012. In 2014 and 2015, i.e. after the effective date of the amendment, the tax administrator dispatched a request for international cooperation. It thus believed that the deadline for the assessment of tax had not run out and that the tax inspection could continue. The SAC was of a different opinion: it refused to apply the new regulation on the running of the tax assessment period that started before the effective date of the amendment, which would have been harder on the taxpayer, without there being a special transitory provision saying so. Simply speaking, dispatching a request for international cooperation does not suspend/extend a deadline for assessing tax that started to run before 1 January 2014. In the case in question, the period for tax assessment had therefore already elapsed and the administrative courts prohibited the tax administrator from continuing the tax inspection.

For tax inspections concerning older taxable periods with an international aspect, we recommend paying increased attention to this judgement and reviewing whether the period for assessing tax has not already lapsed. In such cases, the tax administrator must not continue with the tax inspection and shall not assess tax.

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