Tax authorities may not unduly suspend tax limitation periods

It is the practice of tax authorities to institute criminal proceedings only so that the limitation period for tax liabilities is suspended. Such instrumental application of the Tax Ordinance has been opposed for years by taxpayers because it deprives the taxpayer of the benefit of the institution of limitation and allows the tax authorities to act freely. The Supreme Administrative Court (hereinafter: NSA) ruled on July 30, 2020 (I FSK 128/20 and I FSK 42/20) that such a practice of tax authorities is inadmissible. In an oral statement of reasons, he stated that the tax authorities do not have the power to initiate criminal penalties freely, without any restriction, merely to suspend the limitation period for tax liabilities. Any initiation of fiscal penal proceedings shall be subject to substantive review by instances and courts. The practice of the tax authorities, which has been applied so far, which has beneficial effects on the tax apparatus (in the form of interruption of the limitation period) and, at the same time, has adverse effects on the taxpayer, is not acceptable. Moreover, the NSA stated that administrative courts should prevent abuse of the law, even if it is committed by public authorities.

It was often the case that penal fiscal proceedings were initiated just before the expiry of the statutory statute of limitations, and then no action was taken in the initiated criminal proceedings. The taxpayer was only informed about the suspension of the limitation period of his obligation.