All questions

Commencing disputes

At the heart of any tax dispute is a disagreement between the tax authorities and a taxpayer as to how tax should apply to a given situation situation (i.e., how tax should be assessed). On the other hand, nowadays the vast majority of assessments result primarily from the interaction between the taxpayers and the tax authorities' software. This entails that most disputes arise either when taxpayers wish to amend previously filed tax returns, or, above all, when the tax authorities initiate tax audit procedures and disagree with how or what the taxpayers have stated to be their tax-related affairs.

i Amending tax returns

The amendment of tax returns by taxpayers is possible in the event of factual or legal errors that affect the accuracy of the original return or whenever new facts dictate a retrospective reassessment of tax. Moreover, in the case of self-assessed taxes such as corporate income tax and value added tax (VAT) it is mandatory whenever the amendment implies an increase of the tax assessed.

Personal income tax returns may be amended, as a rule, within 120 days as of the payment deadline of the original tax assessment being notified to the taxpayer. By contrast, when favourable to the taxpayer, the amendment of corporate income tax returns may take place within one year as of the original filing deadline and, when unfavourable, within the general four-year statute of limitations period. Similarly, VAT assessments may be amended within two years of the original filing when the amendment is favourable to the taxpayer and, when unfavourable, must be amended with no time limit other than the aforementioned general statute of limitations period.

Regarding legal or factual errors detrimental to taxpayers, once the deadlines for amending the corresponding returns have expired, taxpayers may only seek to alter tax assessments by initiating a formal dispute with the tax authorities, as discussed below.

The amendment of tax returns within the assessment procedure by the tax authorities is possible and is usually the result of the cross-referencing of data provided by other taxpayers or, rather less frequently, from the automatic exchange of information with foreign tax authorities. However, as a rule, the tax authorities tend to act once taxes have already been assessed, examining the conformity of such assessments within tax audit procedures. These may be initiated at any time during the statute of limitations period, which is then stayed whenever the tax audit takes place at the taxpayers' premises or facilities (i.e., is an 'external' tax audit).

Tax audits must be completed within six months, a period that in certain circumstances may be extended for up to two additional three-month periods. Should the tax audit include the resort to exchange of information mechanisms with foreign tax authorities, an additional extension of 12 months is applicable.

Within the tax audit procedure, when the tax authorities reach a preliminary conclusion that an amendment detrimental to the taxpayer is due, the taxpayer is notified to present any additional information and issue an opinion on such conclusion within a set deadline ranging from 15 to 30 days. Pursuant to such hearing, the final tax audit report is issued dictating any tax assessments the tax authorities deem justifiable.

ii Disputes related to tax assessments

Once a tax assessment is issued, taxpayers may typically choose to dispute it via an administrative procedure within the tax authorities hierarchy, or go directly either to the Judicial Tax Court or to the Tax Arbitration Centre. In certain specific circumstances, however, the administrative review procedure is a precondition that needs to be met before taking the dispute to court. This is generally the case with self-assessments or withholding tax disputes, in which taxpayers can only go directly to court if the dispute does not pertain to a matter of fact and the assessment was made in accordance with assessment guidelines published by the tax authorities.

The administrative claim procedure is free of charge and may generally be filed within a 120-day period as of the assessment's payment deadline. However, administrative claims pertaining to self-assessments or withholding tax may be filed within two years following the assessment. Administrative claims are to be decided by the tax authorities within four months. Upon an express or tacit dismissal of the administrative claim, taxpayers may choose to lodge an administrative appeal to the Ministry of Finance (within 30 days), to file a judicial claim before the Judicial Tax Court (within three months) or, when admissible, to file a tax arbitration request before the Tax Arbitration Centre (within 90 days). Administrative appeals should be decided within 60 days. Pursuant to such decision, the dispute may still be brought to either the Judicial Tax Court or the Tax Arbitration Centre (within the aforementioned deadlines).

Similarly, whenever a taxpayer chooses to challenge the tax assessment directly before the Judicial Tax Court, the corresponding judicial claim is to be filed within three months as of the assessment payment deadline. Alternatively, should the chosen litigation course be tax arbitration, the corresponding tax arbitration request needs to be filed within 90 days as of the assessment payment deadline.

iii Other disputes

In addition to the prevalent disputes related to tax assessments there are of course myriad actions and procedures by the tax authorities that may give rise to disputes with taxpayers. Broadly speaking, actions by the tax authorities that do not directly pertain to tax assessments may be judicially challenged by taxpayers via the general judicial administrative claim made available as a remedy against illegal action by governmental and other public entities. This is to be filed within three months as of the date the disputed action is notified to the taxpayer. In tax matters it applies, for instance, to cases such as the refusal or withdrawal of tax benefits or whenever taxpayers wish to challenge the outcome of binding information requests.

However, there are other disputes that take place in the tax field and do have specific procedures. Worth mentioning in this regard are actions taken by the tax authorities within tax audit procedures such as the access to banking information or the resort to presumptive taxation on the grounds of wealth signs evidenced by the taxpayer held incompatible with the corresponding personal income tax returns. In such cases, taxpayers may challenge said actions via a specific judicial appeal to be lodged within 10 days as of knowledge of the tax authorities' intent. On the other hand, whenever indirect methods of taxation are applied, a special administrative procedure exists entailing an internal review procedure and a technical debate between designated experts, which is a precondition for the subsequent judicial claim. The taxpayer needs to request such review committee within the 30 days following the notification of the tax audit report.

Tax procedure law additionally foresees legal actions that are ancillary in nature, such as judicial order requests to access and obtain copies of the tax authorities' records, to put an end to unlawful procedural delays or to force the tax authorities to comply with judicial decisions. Also available to the tax authorities are precautionary or interim measures, such as the seizure of goods or documents, and the sealing of premises to preserve evidence, the legality of which may be challenged by taxpayers within the corresponding procedures.

A final note should be made regarding tax foreclosure procedures, which are conducted by the tax authorities under judicial oversight. Upon being summoned to such a procedure, taxpayers have 30 days to lodge a judicial opposition either challenging the legality of the foreclosure procedure or arguing their illegitimacy as debtor. In addition to such judicial opposition, the legality of all other actions by the tax authorities while conducting the tax foreclosure may be challenged via a judicial claim to be lodged within 10 days of becoming aware of the action.