Changes to procedural rules that came into effect on 1 January 2018 have made the taxpayer’s life more difficult when defending his position in tax disputes.

The new law does not allow taxpayers to refer to any new facts or evidence in their appeal, if they already knew this information before the Tax Authority formally passed its resolution.

Until now, taxpayers often came up with new arguments in the appeal to the first instance resolution. Now, the observations will be the key documents if a taxpayer is about to challenge the findings of the tax authority.

Observations may be submitted after receiving the minutes of the tax audit, and from now on these observations should be a comprehensive document, containing all the facts, circumstances, and arguments the taxpayer intends to use to defend his position. This tool has also been available before but used rarely and inconsistently by taxpayers.

Although the deadline for submitting observations has been extended to 30 days (from the earlier 15), collecting the necessary information will require enormous effort, quick analysis and prompt action from a taxpayer.

In addition, the new rules state that taxpayers are not allowed to refer any facts and circumstances to the court that were not presented in the underlying administrative phase, unless this evidence was not available at the time, or was rejected by the Tax Authority. These restrictions effectively mean that whatever is not brought up in observations will remain buried forever.

The essential takeaway from these changes: involving tax lawyers once a court case is pending may be too late. You should instead alert your lawyers as soon as the Tax Authority starts an audit, and hints there may be issues. This will give you and your team time to create a defence strategy and position papers before minutes are issued.

In this way, you will have a comprehensive defence in place from the moment the minutes are received until – if necessary – the case is brought to the Supreme Court.