The Romanian Constitutional Court has ruled that any taxpayer who has made an unlawful payment to the tax authorities has the right to charge interest from the date on which such payment was made and until the date of actual refund.

With its decision – published on 22 December 2015 in the Romanian Official Gazette, the Romanian Constitutional Court declared as unconstitutional the provisions of the article 124 par. (1) of the Fiscal Procedure Code providing the following: "For amounts to be reimbursed or refunded from the budget, taxpayers are entitled to interest starting with the following day of the deadline stipulated in article 117 (2) and (21 ) or article 70, as appropriate, until the date of settlement by any of the means provided by law." 

The provisions of article 70 of the Romanian Fiscal Procedure Code to which the provisions of art. 124 par. (1) make reference to stipulate the following: "Requests by the taxpayer under this Code shall be settled by the tax authorities within 45 days of registration."

Before the issuance and application of this decision by the Romanian Constitutional Court, the taxpayers were allowed to request payment of delay interest only if the tax authorities were not settling the requests for restitution of amounts unduly paid (as acknowledged by a decision of the tax authorities or of a court) within 45 days. Thus, the tax authorities were bound to pay interest only starting with the 46th day, irrespective of the fact that the amounts in question have been unduly paid by taxpayers many years ago.

In practice, it takes more than one year for a final decision in a fiscal litigation case to be issued because such disputes involve complex arguments and the taking of evidence. Even if a temporary injunction procedure is available to the parties, clear evidence of the imminent and significant loss is required and this is usually very difficult to provide to the court. We have also noted that the Romanian courts of law are usually reluctant to issue such a temporary injunction and obstruct the collection of taxes throughout the proceedings.

The judges of the Romanian Constitutional Court found that "the provisions of art. 124 (1) relative to those of art. 70 of Government Ordinance no. 92/2003 regarding the Fiscal Procedure Code, although guarantee to provide interest for the failure to refund, does not cover the full damage to be incurred by the taxpayer for having voluntarily agreed to execute a tax obligation that he regarded as being unlawful, and this was subsequently acknowledged by decision of a court of law or by the tax authority itself. In this way, a diminishing of the taxpayer estate occurs, due to an action of the state, thus being affected the right to private property. It obviously appears that the interest should be calculated from the date of freezing the amounts for which the refund is requested. This way, a reasonable and fair treatment between the parties is ensured."

This is a very important change for the fiscal practice because the rule is from now on that in all cases in which the tax authorities collect undue amounts from the taxpayer, such authorities shall be obliged to pay interest from the date of collecting the amounts.

This decision, which withdraws a certain "privilege" from the Romanian tax authorities, has in effect created a more balanced fiscal relationship between the tax authorities and the taxpayers. Since the decision provides a more drastic sanction for tax authorities that issue unlawful tax decisions and collect undue taxes, it may prevent the practice on the part of authorities to collect amounts for the state budget at all costs in the future.

Moreover, the arguments put forth by the Romanian Constitutional Court regarding the right of the taxpayer to obtain full compensation for damage incurred due to the unlawful actions of the tax authorities will be also applicable as a rule for the application of the new fiscal Romanian legislation.