Surcharges do not have to be imposed where the taxpayer files self-assessments outside the time limit to adapt its conduct to points made by the auditors
A surcharge has to be imposed for the late filing of self-assessments. For this to apply, however, the self-assessment must be filed spontaneously, in other words not due to a prior request by the authorities. In a new decision, the Central Economic-Administrative Tribunal (TEAC) made the definition of prior request more flexible.
In an audit, a taxpayer’s position was adjusted by increasing the taxable amount for VAT purposes in respect of its vehicle leasing activities. According to the auditors, the taxable amount should have included all the items invoiced to the lessee, including the finance costs charged to it (which had not been included by the taxable person to calculate the taxable amount).
The company decided to file supplementary returns for fiscal years following those affected by the adjustment, to apply the method decided in the audit.
The tax authorities imposed surcharges for the late filing of those returns. They argued that those returns had been filed spontaneously because the methods determined in the audit on earlier years could not be transferred automatically to subsequent fiscal years. This case is not comparable, in the tax authorities’ opinion, with those examined by the National Appellate Court (judgment on March 30, 2011, in appeal 141/2008), the Supreme Court (in a judgment on November 19, 2012, in appeal 3526/2011) and TEAC (in a decision on October 9, 2014), because, in these cases, the tax audits had resulted in reductions to taxable amounts or amounts to be offset or deducted in subsequent years, which made it necessary for the taxpayer to adjust its position in those tax periods.
In its decision on April 20, 2021, TEAC acknowledged that its interpretation to date had been that there were two separate types of cases:
- Where the tax authorities have all the information as a result of a prior verification and can therefore automatically extend the adjustment to the second period without conducting any new audit work. In these cases, if in view of the absence of a complete adjustment by the tax authorities the taxpayer elects to file supplementary returns, a “prior request” by the tax authorities must be considered to exist and therefore no surcharges can be imposed.
- Where the circumstances described above do not arise. In these cases, by filing the supplementary returns the taxpayer has acted spontaneously, namely the taxpayer cannot be considered to have acted based on a “prior request” and therefore surcharges need to be imposed.
TEAC has now changed its method (based on the Supreme Court’s conclusions in its recent judgment of November 23, 2020), to make a flexible interpretation of the definition of “prior request”. It concluded that this request must be considered to exist where the taxpayer files late self-assessments to adapt its conduct to the tax authorities’ conclusions in a prior verification procedure. In other words, according to the tribunal, the absence of surcharges “would not apply only in cases where the taxpayer’s subsequent acts are the necessary consequence of prior acts by the tax authorities, resulting in the required subsequent correction and this is quantified, (…) instead it should include others induced or driven by taxpayers’ knowledge of relevant data for determining the tax debt that had become known in a procedure conducted to adjust an earlier period, with substantially similar facts”.
In TEAC’s view, this interpretation is strengthened where the taxpayer’s conduct has not been penalized in the earlier procedure.
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