Last autumn, the courts dealt with an issue that had troubled many tax payers. Is it possible to claim a tax relief arising from investment incentives during the additional assessment procedure? The courts have confirmed that it is possible. How did the courts justify their opinions?
In November 2023, the Supreme Administrative Court passed judgement No. 2 Afs 118/2022-53, in which it resolved a dispute over the interpretation of Section 35b(1)(a) of the ITA, i.e. the question of whether it is possible to apply a higher tax relief for investment incentives within a additional tax return. The Supreme Administrative Court concluded that it was possible, and added that it was “not decisive whether the higher tax is levied on the basis of the tax payer’s or the tax administrator’s initiative”. The same conclusion had been previously reached by the Regional Court in Pilsen in October 2023 (judgement No. 57 Af 11/2022-82) in the case of our client. In this judgement, the court ruled on the issue of the possibility of applying a higher tax relief arising from an investment incentive during the entire additional assessment procedure, and fully upheld our argumentation and confirmed the possibility of applying an additional tax relief arising from an investment incentive during the tax audit procedure and during the entire appeal procedure.
In both cases, the courts held that the only limitation on the issue of the additional application of a higher tax relief arising from an investment incentive was the (final and enforceable) additional assessment of a higher tax liability under the law. Since neither in the case where the company files an additional tax return, nor in the case where there is an additional assessment procedure, there is no doubt that there has not yet been a final assessment of any tax liability, or even a higher tax liability, the application of the relief cannot be limited by this.
It is therefore evident from these cases that, although a tax issue may initially appear highly unclear and its conclusion in favour of the tax payer questionable, it is worth defending against the tax authority’s view. If the tax payer’s approach is based on economic rationality and is founded on the logic of the law and the purpose of the provision in question, it is likely that the court will, sometimes after lengthy proceedings, uphold the taxpayers’ position.
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