Reff & Associates | Deloitte Legal obtains a final solution from the High Court of Cassation and Justice which cancels a decision to reconduct a tax audit, exclusively on procedural arguments
12 April 2023
Following the court’s decision, the company represented by the law firm recovers a corporate income tax of approximately one million euros and avoids a dispute on the merits, which would have lasted four to five years
A team of Reff & Associates | Deloitte Legal lawyers specialized in tax litigation has obtained, before the High Court of Cassation and Justice, a favorable decision for a company part of a group operating in the energy sector, which will lead to the recovery of a corporate income tax of approximately one million euros. The victory was obtained after the lawyers have invoked and analyzed a significant number of legal and tax aspects regarding the procedural requirements applicable to an administrative solution which cancels a tax assessment decision and obliges the authorities to re-conduct the tax audit, which they failed to notice in this case.
As a result of a tax audit, the tax administration established a taxable income at the level of 2012 and computed additional corporate income tax due by the company represented by the Reff & Associates | Deloitte Legal litigation team. Considering that the limitation period for 2012 was met, the company filed an administrative challenge. The General Directorate for Complaints Settling confirmed that the limitation period for 2012 had been met and accepted the administrative appeal, but ordered the authorities to re-conduct the tax audit and obliged the new tax inspectors to transfer the additional corporate income tax in 2013, on the grounds that the provisions for the relevant period were also registered in the company's accounting records in 2013. The General Directorate for Complaints Settling argued that neither the facts nor the tax findings would change once the tax audit was re-conducted.
The Reff & Associates | Deloitte Legal team presented before the Bucharest Court of Appeals numerous procedural arguments in the legal claim against the decision to reconduct the tax audit, including the authority’s failure to comply with the cases provided by law for ordering a re-check, the breaching of the limits of the re-check, the cancellation of the reserve of subsequent audit as a result of closing the fiscal period for 2013, the failure to comply with the principle of the uniqueness of the tax audit and the non-aggravation of the taxpayer's situation in his own tax appeal etc.
The decision of the first court, which annulled both the decision ordering the re-check and the tax audit decision on the corporate income tax for 2012 for which the limitation period was confirmed, was confirmed by the High Court of Cassation and Justice following the rejection of the appeals filed by the tax authorities.
The tax litigation team that secured this decision was comprised of Emanuel Bondalici, Senior Managing Associate, and Ştefan Mihărtescu, Managing Associate, Reff & Associates | Deloitte Legal.
"The High Court of Cassation and Justice’s decision has a twofold effect: from a legal perspective, it sanctions the unlawful conduct of the tax authority which disregarded essential principles of fiscal procedure, by taking advantage of the manner in which the client made the accounting registrations and of the specifics of the tax deduction of special purpose income in the energy sector. From a practical perspective, the client will recover approximately one million euros following a dispute that was judged in court in only one and a half years strictly on procedural matters. Basically, the client avoided a dispute which would have lasted no less than four to five years if it had been judged on the merits," Emanuel Bondalici, Senior Managing Associate, Reff & Associates | Deloitte Legal, pointed out.
"The courts' decisions in this case restores the legality and ensures an adequate protection of the procedural rights of our client, as they confirm that the tax audit bodies cannot hijack the mechanism of reconducting the tax audit in order to transfer a tax for one fiscal year for which the limitation period was reached to the next year, in order to artificially obtain additional income for the state budget," said Ştefan Mihărtescu, Managing Associate, Reff & Associates | Deloitte Legal.
Reff & Associates | Deloitte Legal has over 70 lawyers, out of which the tax and non-tax litigation practices comprise over 20 lawyers, who benefit from the expertise of professionals from all practice areas within the Deloitte network, including tax and financial advisors, technical experts and digitalization solutions. Thus, the multidisciplinary teams can cover all types of business disputes, from fiscal, to commercial and administrative litigation.
Reff & Associates | Deloitte Legal is recognized as a leading law firm in Romania for the quality of services and ability to deliver solutions on complex legal matters. The areas of practice include banking and finance, competition law, employment law, energy and environment law, insolvency law, legal management consulting, litigation, corporate, mergers and acquisitions, public sector, real estate. The firm represents in Romania Deloitte Legal, a global network with more than 2,500 lawyers in more than 80 countries.