All questions

Commencing disputes

i The tax assessment act

In general terms, the process of tax disputes commences with the receipt of an assessment act, which constitutes a personal administrative act. The assessment act is issued based on either the tax return or data filed by the taxpayer or, in the case of a tax audit, the report of the audit.

Under the TPC, a taxpayer may file an initial tax return (Article 18, Paragraph 1), or an amending tax return if he or she becomes aware of a mistake or an omission in his or her initial return (Article 19, Paragraph 1). The TPC also provides for a tax return 'with reservation', when the taxpayer has doubts as to the existence of a tax obligation for a certain item of his or her return (Article 20, Paragraph 1). The reservation can either be accepted or rejected by the General Secretary for Public Revenue within 90 days from the filing of the tax return.

Under the TPC, a tax assessment act may be categorised as follows:

  1. direct tax assessment act (Article 31), known also as self-assessment: it results directly from the filing of a tax return by a taxpayer;
  2. administrative tax assessment act (Article 32): may be issued by the tax administration based not only on a tax return, but also on other data available at the administration;
  3. estimated tax assessment act (Article 33): may be issued when a taxpayer has failed to file a tax return. Upon filing of a tax return, even an overdue one, the estimated tax assessment ceases to apply and a new one is issued based on the filed return;
  4. corrective tax assessment act (Article 34): may be issued if, following a tax audit, a tax return is proven mistaken or inaccurate. Once a corrective tax assessment act is issued, a new corrective tax assessment act may be issued based only on the existence of 'new elements' (i.e., elements that could not have been known by the tax administration during the initial tax audit); and
  5. pre-emptive tax assessment act (Article 35): may be issued before the lapse of the deadline for submission of a tax return when there are specific indications that the taxpayer intends to leave the country, thus jeopardising the collection of the tax, especially through the transfer of assets to third parties. The pre-emptive tax assessment act is followed by a corrective tax assessment act within one year from the date of issuance (Paragraph 3).

The right of the tax administration to issue a tax assessment act must be exercised within five years of the lapse of the year during which the deadline for submission of the tax return expires (Article 36, Paragraph 1 TPC). This time limit might be extended under certain circumstances. In cases of tax evasion, the time limit is 20 rather than five years (Paragraph 3).

The law allows the tax administration to conduct tax audits to assess the correctness of the facts declared by taxpayers and to assess their tax liability in general. In particular, the tax administration possesses extensive powers during audits, such as the lifting of professional and tax secrecy. Following a tax audit, the tax administration serves a notice to the taxpayer containing the results of the audit and a provisional corrective assessment act. The taxpayer can state his or her views on the provisional tax correction in writing within 20 days, and the tax administration issues the final corrective tax assessment act within one month of the filing of the taxpayer's views.

Disputes can also arise from omissions of the tax administration. An omission exists where the administration, although obliged by law, fails to issue an individual administrative act to regulate a particular legal relationship. Such omission occurs with the lapse of the deadline provided for in the legislation for the issuance of the relevant act. When an omission takes place following a petition from the taxpayer for the issuance of a particular act, it constitutes a tacit rejection of the petition challengeable by the petitioner. In practice, a large number of disputes are generated by omissions of the administration.

ii Challenging the acts of the tax administration

Acts and omissions of the tax administration can be contested by the taxpayer before the Dispute Resolution Directorate, as provided in Article 63 TPC. As mentioned above, this is a mandatory internal review procedure (quasi-judicial action) established as a prerequisite before referring the dispute to the administrative courts in an effort to alleviate the burden of accumulated cases before the latter.

Exceptionally, the taxpayer can challenge directly before the competent administrative courts only an estimated tax assessment act without the prerequisite of the quasi-judicial action (Article 35, Paragraph 1 TPC). The exception also applies to disputes falling within the competency of the president of the Administrative Court of First Instance (see Section III.i).

The quasi-judicial action must be submitted before the competent tax administration within 30 days of the notification of the act or the tacit rejection, and is forwarded to the Dispute Resolution Directorate within seven days. The decision of the Dispute Resolution Directorate must be issued within 120 days of the day of submission. Non-issuance of a decision within the relevant time limit is considered tacit rejection of the action (and the lapse of the time limit constitutes a notification of the rejection). Although not explicitly provided for in Article 63, it is accepted that the tax administration is obliged to inform taxpayers in writing on any administrative act of the right to file a quasi-judicial action and the inadmissibility of a direct recourse to the administrative courts. An omission of the aforementioned notification means that a direct recourse might be admissible.

Upon filing of the quasi-judicial action, payment of 50 per cent of the disputed amount is suspended, provided that the remaining 50 per cent is paid to the tax administration. Depending on the outcome of the case, the tax administration either refunds to the taxpayer any excess amount paid in advance or any additional payment that becomes due. A payment suspension petition may be filed for the former 50 per cent (which is immediately payable), but such suspension may be granted only on the grounds of 'irrevocable damage' to the payer. Non-issuance of a decision on the suspension application within 30 days of its submission constitutes tacit rejection.