In a current judgment, the Supreme Administrative Court addressed the issue of the moment of tax audit commencement. It is important to determine this moment precisely as it is the point when the current lapse period for tax assessment is interrupted and a new lapse period of three years starts to run.
In the discussed case, the tax administrator formally initiated the tax audit with a substantial delay since its actual commencement which the tax administrator regarded as mere search activities.
The Supreme Administrative Court agreed with the taxable entity stating that within their practices, the tax administrator is obliged to respect the legal framework of the specific procedure and to remain within the boundaries. If the tax administrator examined the facts decisive for the correct determination and assessment of the tax in a complex way and the extent of this examination in relation to the taxable entity was factually and temporally defined, they should have chosen the practice enabling them to do so, i.e. tax audit.
Impacts on tax procedures
Out of the possible lawful procedures, it is the tax audit that allows comprehensive evidence and subsequent valuation of decisive facts. Given the fact that these activities were carried out by the tax administrator prior to the formal tax audit commencement, it is necessary to consider the tax audit as actually commenced already within the procedure designated by the tax administrator as search activities. The relevant moment for the interruption of the lapse period is the moment of actual tax audit commencement, and not its formal declaration.
The above-mentioned judgment may have a significant impact on tax procedures where the tax administrator, before the formal tax audit commencement, carried out search activities or local investigations whose intensity and scope exceeded their statutory limits. The related earlier initiation of the interrupted lapse period can result in tax assessed after the expiration of the period. Since the lapse period expiration can be challenged also in later phases of the procedure and even before a court, do not hesitate to contact us if you have experienced such an intensive inspection prior to the tax audit commencement.