SAC: Partial payment orders may not be issued
According to the Supreme Administrative Court, the Tax Procedure Rules do not allow the issuance of a payment order for only a portion of tax. This means that VAT payers from whom the tax administrators retain excess deductions sometimes amounting to millions of Czech crowns because of a few invoices can no longer hope for a quicker refund of the indisputable part of the retained excess deductions.
Claiming the tax neutrality principle and other general tax administration principles, last autumn, the Regional Court in Prague decided that it was possible to issue a partial payment order for the indisputable portion of a retained excess deduction (i.e. to issue a payment order for a portion of tax). The court ruled this way even though the Tax Procedure Rules do not recognise such a decision. The court’s judgment raised a number of questions, in particular whether it is possible to issue a partial payment order without a tax entity’s application. In early summer, the case was discussed before the Supreme Administrative Court following a cassation complaint filed by the financial administration.
The SAC judges agreed with the financial administration’s representatives and concluded unanimously that the Tax Procedure Rules do not allow for the issuance of partial payment orders, claiming that administrative procedure concepts such as partial decisions may not be applied to tax matters. Generally, the state can only do what the law allows it to do and, accordingly, the tax authorities may not be given other procedural options reaching beyond the scope of the Tax Procedure Rules. The judges also agreed that the introduction of a new type of decision would significantly affect the entire tax procedure and would in practice give rise to more questions than answers, which also played an important role during their decision-making. Taxpayers must therefore make use of other instruments to alleviate the negative effects of long-retained excess deductions, always considering the specific circumstances.
The refunding of indisputable parts of retained excess VAT deductions should hopefully proceed more quickly with the self-assessment of tax that the Ministry of Finance plans to introduce along with a new Income Tax Act in 2020. . Meanwhile, a self-assessment system has only been applied in the administration of gambling tax. Hence, we will have to wait and see how the self-assessment in VAT or partial payment orders will actually look like.