NNDKP CELF Alert no. 2/2020 – The appeal in the interest of the law revolutionizing the calculation approach of statute of limitation for tax liabilities
16.09.2020 – On September 14, 2020, the High Court of Cassation and Justice (“HCCJ”) admitted the appeal in the interest of the law that will end tax authorities’ practice of extending by 1 year the five-year limitation period applicable with respect to profit tax, artificially and in breach of the relevant legal provisions.
The HCCJ ruled as follows: “In accordance with and for the application of the provisions of Art. 91 paragraphs (1) and (2) in conjunction with the provisions of Art. 23 of the Government Ordinance no. 92/2003 on the Fiscal Procedure Code, republished, as amended and supplemented, the five-year limitation period concerning tax authority’s right to impose tax obligations consisting in profit tax and ancillary liabilities is calculated as of the 1st of January of the year following the year during which the taxpayer generated the taxable profit for which they must pay profit tax.”
More specifically, the HCCJ decided that for the profit tax recognized for example in 2014, the statute of limitation started to run on January 1, 2015.
The tax authorities traditionally considered that the limitation period started, in the aforementioned example, on January 1, 2016 (not on January 1, 2015, as correctly established by the supreme court), based on the fact that the final tax return for profit tax is filed in the year following the one in which the relevant income is recognized.
Basically, tax authorities considered relevant as timing for the calculation of the taxable basis, the submission of the final tax return.
Thus, the approach taken by tax authorities, including with respect to the resolution of complaints, has been centered on an artificial extension of the statute of limitation due to an interpretation of the legal provisions that is detrimental to taxpayers.
For these reasons, the appeal in the interest of the law is very welcome and highly beneficial to taxpayers.
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