What was the most important tax ruling of 2025?
What was the most important tax ruling of 2025?
With the end of the year, it is traditionally advisable to look back a little and remind ourselves of what happened during the year. What affects us every year is undoubtedly the legal environment and also the setting of taxes. And it is the balance sheet of tax law that is offered by the commentary on what is probably the most important tax case law of 2025.
In February, the Enlarged Chamber of the Supreme Administrative Court issued a resolution (No. 1 Afs 231/2022-44 of 5 February 2025) that interferes with the established administrative practice of tax authorities, previously set up according to the case law of the Constitutional Court. Unfortunately, the change is rather for the worse for taxpayers.
The SAC expressed two conclusions: in the first, it explained the effects of the now older judgment of the Constitutional Court (file no. I. ÚS 3244/09 of 10 March 2011), which simply stated that if the subject of tax proceedings is a taxpayer's entitlement (typically the right to excessive VAT deduction) and this proceeding does not end within the limitation period for tax assessment by a final tax decision, the taxpayer is automatically entitled to receive what he claimed (i.e. what he claimed) in his tax return.
The above-mentioned judgment of the Constitutional Court related to a case under the now invalid Act on the Administration of Taxes and Fees (valid and effective until 31.12.2010). However, the Constitutional Court explicitly stated that its conclusions should also be applied to tax proceedings under the Tax Code (No. 280/2009 Coll.), which is valid and effective to this day. This is how the find was understood and interpreted. In response, the General Financial Directorate issued a methodology for tax authorities, where it accepted the above conclusion into practice and set up the necessary internal processes for its application.
However, the Extended Chamber of the Supreme Administrative Court has now interpreted contrary to this that this conclusion does not apply and, according to the current Tax Code, the tax cannot be determined at all after the expiry of the tax assessment period, and therefore not purely for the benefit of the taxpayer.
The Enlarged Chamber justified this by a different procedural technique of the so-called "implicit" tax assessment, in which it is of course right. However, despite this, the result is a 180-degree turn of the current established administrative practice. Already in 2011, when the Constitutional Court's ruling was published, it was clear that the procedural technique of the so-called "implicit" tax assessment under the Tax Code is different from this method of tax assessment under the Act on the Administration of Taxes and Fees, and undoubtedly the Constitutional Court made its above-mentioned conclusions in the light of this fact, and the case law of the Supreme Administrative Court was then followed up on this opinion, which confirmed it.
The second conclusion of the SAC is that if a taxpayer files an additional tax return for a lower tax in the last year of the 10-year limitation period for tax assessment, then this deadline (otherwise in principle not exceedable) will be extended by 1 year so that the tax administrator has time to assess the claims made in this return and to grant or refute the taxpayer's entitlement to a tax reduction.
This is a very revolutionary conclusion, because in this case the court used the analogy of the law to extend the 10-year forfeiture period, which otherwise cannot be extended or broken without a completely clear and explicit legal regulation. At the same time, however, it emphasized that the consequences of this extension cannot be to the detriment of the taxpayer, i.e. its tax liability cannot be increased within this extended period.
According to some expert opinions, this second conclusion potentially opens a Pandora's box of endless extensions of the tax assessment deadline, because if a reason can be found for an "exceptional" extension in the 10th year (which is why we exceed the otherwise insurmountable), then can't an equally serious reason be found in the 11th year and subsequent years? This conclusion is also interesting in that the Enlarged Chamber was not asked a question on the issue at all, and therefore the conclusion was made beyond what the Enlarged Chamber was supposed to solve according to the assignment. Some experts then infer from this the less binding nature of this second conclusion.
Already in the case of the conclusions of the referenced judgment of the Constitutional Court from 2011 (which made it possible to determine the tax after the expiry of the "non-exceedable" limitation period for tax assessment), it was a completely non-systemic step from a legal point of view, which was initially strongly opposed by the administrative courts, led by the Supreme Administrative Court. After all, that is why the case was brought before the Constitutional Court at that time. However, I understand that the conclusions of the Constitutional Court have a certain fair basis in the idea that the tax administrator is responsible for the proper course of the tax proceedings, and if it initiates control procedures, i.e. in a certain way challenges the taxpayer's claim, but subsequently does not have time to make a final decision on this claim within the specified period, the taxpayer should not "pay" for this situation by subsequently having to defend its claim in the subsequent proceedings for damages. This conclusion was adopted and implemented in the administrative practice of the Financial Administration, a methodology was issued for it, etc. And in accordance with this conclusion, administrative courts also decided (although not exclusively).
At the moment, therefore, the opposite verdict stated in the first verdict of the enlarged chamber from February this year is somewhat surprising for experts and practitioners, and especially disrupting the already established continuity. That is why it has sparked great discussions in the professional public.
In February, the Enlarged Chamber of the Supreme Administrative Court issued a resolution (No. 1 Afs 231/2022-44 of 5 February 2025) that interferes with the established administrative practice of tax authorities, previously set up according to the case law of the Constitutional Court. Unfortunately, the change is rather for the worse for taxpayers.
The SAC expressed two conclusions: in the first, it explained the effects of the now older judgment of the Constitutional Court (file no. I. ÚS 3244/09 of 10 March 2011), which simply stated that if the subject of tax proceedings is a taxpayer's entitlement (typically the right to excessive VAT deduction) and this proceeding does not end within the limitation period for tax assessment by a final tax decision, the taxpayer is automatically entitled to receive what he claimed (i.e. what he claimed) in his tax return.
The above-mentioned judgment of the Constitutional Court related to a case under the now invalid Act on the Administration of Taxes and Fees (valid and effective until 31.12.2010). However, the Constitutional Court explicitly stated that its conclusions should also be applied to tax proceedings under the Tax Code (No. 280/2009 Coll.), which is valid and effective to this day. This is how the find was understood and interpreted. In response, the General Financial Directorate issued a methodology for tax authorities, where it accepted the above conclusion into practice and set up the necessary internal processes for its application.
However, the Extended Chamber of the Supreme Administrative Court has now interpreted contrary to this that this conclusion does not apply and, according to the current Tax Code, the tax cannot be determined at all after the expiry of the tax assessment period, and therefore not purely for the benefit of the taxpayer.
The Enlarged Chamber justified this by a different procedural technique of the so-called "implicit" tax assessment, in which it is of course right. However, despite this, the result is a 180-degree turn of the current established administrative practice. Already in 2011, when the Constitutional Court's ruling was published, it was clear that the procedural technique of the so-called "implicit" tax assessment under the Tax Code is different from this method of tax assessment under the Act on the Administration of Taxes and Fees, and undoubtedly the Constitutional Court made its above-mentioned conclusions in the light of this fact, and the case law of the Supreme Administrative Court was then followed up on this opinion, which confirmed it.
The second conclusion of the SAC is that if a taxpayer files an additional tax return for a lower tax in the last year of the 10-year limitation period for tax assessment, then this deadline (otherwise in principle not exceedable) will be extended by 1 year so that the tax administrator has time to assess the claims made in this return and to grant or refute the taxpayer's entitlement to a tax reduction.
This is a very revolutionary conclusion, because in this case the court used the analogy of the law to extend the 10-year forfeiture period, which otherwise cannot be extended or broken without a completely clear and explicit legal regulation. At the same time, however, it emphasized that the consequences of this extension cannot be to the detriment of the taxpayer, i.e. its tax liability cannot be increased within this extended period.
According to some expert opinions, this second conclusion potentially opens a Pandora's box of endless extensions of the tax assessment deadline, because if a reason can be found for an "exceptional" extension in the 10th year (which is why we exceed the otherwise insurmountable), then can't an equally serious reason be found in the 11th year and subsequent years? This conclusion is also interesting in that the Enlarged Chamber was not asked a question on the issue at all, and therefore the conclusion was made beyond what the Enlarged Chamber was supposed to solve according to the assignment. Some experts then infer from this the less binding nature of this second conclusion.
Already in the case of the conclusions of the referenced judgment of the Constitutional Court from 2011 (which made it possible to determine the tax after the expiry of the "non-exceedable" limitation period for tax assessment), it was a completely non-systemic step from a legal point of view, which was initially strongly opposed by the administrative courts, led by the Supreme Administrative Court. After all, that is why the case was brought before the Constitutional Court at that time. However, I understand that the conclusions of the Constitutional Court have a certain fair basis in the idea that the tax administrator is responsible for the proper course of the tax proceedings, and if it initiates control procedures, i.e. in a certain way challenges the taxpayer's claim, but subsequently does not have time to make a final decision on this claim within the specified period, the taxpayer should not "pay" for this situation by subsequently having to defend its claim in the subsequent proceedings for damages. This conclusion was adopted and implemented in the administrative practice of the Financial Administration, a methodology was issued for it, etc. And in accordance with this conclusion, administrative courts also decided (although not exclusively).
At the moment, therefore, the opposite verdict stated in the first verdict of the enlarged chamber from February this year is somewhat surprising for experts and practitioners, and especially disrupting the already established continuity. That is why it has sparked great discussions in the professional public.