A tax dispute is initiated in all tax matters by filing a claim for adjustment against a first-stage tax assessment decision issued by the FTA. The request of a taxpayer is addressed in writing, and in some exceptional cases also orally. A claim for adjustment is then investigated by the Board. However, in the FTA's decisions issued in 2016 or earlier, the scope is more limited, applying only in matters relating to, inter alia, income taxation, inheritance and gift taxation and taxation on real estate.
As an example, in VAT decisions issued by the end of 2016, the appeal is filed directly with an administrative court. However, the FTA then assesses such appeals as rectification matters at the first stage. In the event the FTA accepts the claim, the appeal is considered annulled. If, on the other hand, the FTA rejects the claim entirely or partly, the matter is further processed as an appeal matter in the administrative court.
Taxpayers may also, on their own initiative, amend or correct tax returns filed with the FTA as long as the final tax assessment for the tax year is still open.
As of 1 January 2017, the statute of limitations periods were largely harmonised. Accordingly, the general statute of limitations governing a taxpayer's right to appeal in tax matters is three years. The three-year period is, as a general rule, counted as of the end of the tax year assessed, for example, for tax year 2018 the three-year period will end on 31 December 2021. The former time limit of five years will, however, still be primarily applied to tax decisions and appeal proceedings concerning tax years up to and including 2016. Further, appeal proceedings regarding first-stage tax decisions issued 1 January 2017 or thereafter, based, for example, on tax audits concerning previous tax years, are assessed in accordance with the new legislative regime.
The former general statute of limitations of five years was counted from the beginning of the calendar year following the tax assessment of any given tax year. For example, the date of completion of tax assessment for tax year 2016 was 31 October 2017. The period of appeal for tax year 2016 will expire on 31 December 2022. This is the last day of the appeal period, and the last day for any appeal under the former regime.
Further, the tax recipients (the state, local municipalities, the church, etc.), represented by the Tax Recipients' Legal Services Unit (the Unit), an autonomous entity within the FTA, are also entitled to appeal a tax assessment of any given taxpayer. The statute of limitations for the Unit's appeal is four months as of the completion of the tax assessment of a taxpayer for any given tax year. As an example, for tax year 2018, ending on 31 December 2018, tax assessment shall be completed by 31 October 2019 and accordingly the appeal of the Unit shall be filed by the end of February 2020. For tax years 2016 and earlier, the Unit's appeal is to be filed within a year of the end of the year of tax assessment of a taxpayer. As an example, for tax year 2016 the tax was assessed in 2017, and accordingly the Unit may file an appeal by the end of 2018.
It is also possible that the FTA will seek to reassess a taxpayer's taxation on its own initiative (reassessment). As of 1 January 2017, the reassessment concerning tax years 2017 and onwards shall, as a general rule, be accomplished within three years of the end of the relevant tax year. The three-year limit of the FTA may be extended by one year, however, for example, where the tax assessment is considered to be impeded by the taxpayer, or if the matter requires the FTA's cooperation with other officials. In addition, an 'extended time limit' of six years may be applied in matters concerning, for example, transfer pricing or financing arrangements between related companies.
Under the former regime, the FTA's income tax reassessment for tax years 2016 and earlier has to be accomplished in one, two or five years as of the year of tax assessment of a taxpayer. As an example, with a five-year period the reassessment for tax year 2016 has to be completed by the end of 2022. The time limit applied depends on the degree of guilt addressable upon a taxpayer, for example, the maximum time limit of five years is applicable in cases where the taxpayer has failed to properly file a tax return, or if the tax return or other document filed with the FTA has been false, incomplete or misleading.
As of 1 January 2017, for tax years 2017 and onwards, the reassessment by the FTA may be carried also to the benefit of the taxpayer within three years of the end of the tax year assessed. For tax years 2016 and older, however, the maximum time limit of five years applies; the time limit is two years in cases where there has been a calculation or typing error by the FTA, or the incorrect taxation has been based on incorrect or incomplete information received from third parties. In other situations for tax years 2016 and older, the statute of limitations is one year.
The statute of limitations for tax years 2016 and earlier have, however, varied depending on the tax matter in question. For instance, in VAT matters a taxpayer must appeal within three years of the end of the financial year in question. Furthermore, a taxpayer may appeal a tax assessment decision or a decision issued by an appellate body within 60 days of receiving notice of the decision, irrespective of whether the statutory limitation is exceeded.
In many cases the taxpayer may seek to obtain certainty with regard to a specific tax question subject to interpretation by applying for an advance ruling from the Central Tax Board or the FTA. The Central Tax Board is an autonomous body within the FTA with the specific purpose of issuing advance rulings in tax matters. However, unambiguous or less important matters may be examined by the FTA itself. An appeal against an advance ruling by the Central Tax Board is filed directly with the Supreme Administrative Court, whereas an appeal against an advance ruling by the FTA is filed with an administrative court. The time limit for filing the appeal to both instances is 30 days. An advance ruling application may also be rejected, in which case no advance ruling is issued. A decision rejecting an advance ruling application may not be appealed.
A taxpayer has the right to file a complaint to the chancellor of justice of the government or to the parliamentary ombudsman if the taxpayer considers a civil servant (fiscal agent) to have conducted an unlawful action. The chancellor and the ombudsman generally inform the authority of their view on the matter. Additionally, the said authorities may recommend that the decision is amended, but they do not have the power to overturn a decision.