Limitation, late statements and tax certificates

The successive decisions of the Council of State have now clarified many of the controversial points on the subject of the limitation of income tax cases for natural and legal persons.

The CoS (Decisions No 2932/2017, 1738/2017, etc.) declared unconstitutional the successive extensions of the limitation period, which ultimately end up with the fact that the limitation rule is practically never applied in the 5 year period.

It is now clear that any extension of the limitation period may be made only by a provision made no later than the following year from the year in which the tax liability is incurred and not shortly before the expiry of the limitation period as was normally the case until today.

Based on the above, the fiscal years until 2011 have been limited with regards to income tax, while the fiscal year 2012 is being phased out at 31/12/2018. Exceptionally, the law provides for restrictive cases in which limitation may be extended, e.g. to a decade if additional data arise, to 20 years in the case of tax evasion etc.

Not submitting a tax return

The previous Income Tax Code, which was in force for the years until 2013, provided that a 15-year limitation period should apply if no income tax return has been submitted.

In the case of the submission of the statement during the last year before the expiry of the limitation period, the limitation period shall be extended for a further three years from the end of the year in which the statement is submitted.

In practice, however, the tax authorities (citing the Statement of the Legal Council of State No. 173/2006) attempt to apply the 15-year limitation period also in cases where the statement was submitted but not in due time.

This approach is in direct contradiction to the wording of the provision which clearly provides that 15 years shall apply only if no statement has been made. The same provision provides that where the statement is made late in the last year before the limitation period is reached, the limitation period shall be extended by three years.

Furthermore, the above interpretation is also contrary to Article 78 (1) of the Constitution, which stipulates that a tax is required by law and therefore it is forbidden to identify the essential elements of the tax (subject, object, rate, exemptions and exemptions) by legislative authorization.

In addition, according to consistent CoS jurisprudence, tax provisions must always be interpreted narrowly.

Tax certificate

Another case where tax authorities carry out inspections in violation of legislation concerns cases of companies that have received a "net" tax certificate for the years 2011 and 2012.

According to the decision 1490/2016 of the Athens Administrative Court of Appeal, if a company has received from the statutory auditors the tax compliance report without reservation for the year 2011 (as well as for the year 2012) and has not been audited by the tax authorities within the deadline of 18 months from the submission of this certificate, the possibility of another audit exists only in the case of evidence or indications of particular offenses specifically prescribed by law. If this is not the case, a tax audit is not legal.

This judgment of the Court of Appeal became irrevocable due to the fact that the State did not appeal.

Furthermore, the Dispute Settlement Division, relying on the above-mentioned court judgment in a similar case, accepted the intra-corporate appeal, considering that the State's right to audit the 2011 financial year had already been limited (as early as 30/04 / 2011, i.e. after the expiration of 18 months from the submission of the tax certificate).

It is expected that a relevant circular will be issued by the Independent Authority for Public Revenue (IAPR), which will regulate the matter, as tax audit is under way in a large number of similar cases.

G. Samothrakis, J. Panou
Posted on Sunday newspaper "KATHIMERINI" on 15/04/2018

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