According to the Tax Ordinance, tax proceedings are initiated at the taxpayer's request or ex officio. While we know what to expect when we request the proceedings ourselves (e.g., when requesting a tax ruling), when proceedings are initiated ex officio, it is often associated with stress and uncertainty. This is particularly true when the proceedings are initiated after an audit has concluded.
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Today we want to explain what the tax procedure looks like step by step.
The first element is a decision to initiate proceedings, or a decision to convert a customs and tax audit into tax proceedings. This is a necessary document, without which tax proceedings initiated ex officio cannot proceed. Tax proceedings are initiated on the date we receive this decision. If we do not receive it, the proceedings will be initiated 14 days after the first delivery attempt. Only in the case of establishing tax liabilities, which are determined annually under separate regulations (e.g., real estate tax assessment), or filing an inheritance and gift tax return, is it not necessary to issue a decision to initiate proceedings.
Once the proceedings are initiated, the tax authority gathers evidence. This process takes less time if an audit has been conducted previously. If there hasn't been one, the authority interviews witnesses, gathers documents, and gathers other relevant materials. Once all the evidence has been collected, the authority sets a seven-day deadline for commenting on the matter. However, if the decision is consistent with what was requested during the proceedings, the authority may waive this deadline.
Tax proceedings conclude with a decision that either resolves the matter or dismisses the proceedings. If a decision is issued by a first-instance authority (head of the tax office, head of the customs and tax office, commune head, mayor, or city president), an appeal may be filed within 14 days of its delivery. This appeal should be submitted to the director of the tax administration chamber or the local government appeals board.
The appellate body is obligated to re-examine the case on its merits. It cannot limit itself to assessing whether the lower body conducted the proceedings correctly. It may also conduct supplementary evidentiary proceedings, for example, interviewing witnesses. At this stage, the taxpayer may also present evidence to support their claim.
Proceedings before an appellate body also end with a decision. The appellate body may uphold the first-instance decision, overturn it in whole or in part, or discontinue the appeal proceedings. Taxpayers have the right to file a complaint against any decision with an administrative court within 30 days. If the decision is overturned, the appellate body may either rule on the merits of the case or remand it to the first-instance body for reconsideration. If the ruling on the merits of the case is issued, the ruling cannot be less favorable to the taxpayer than the first-instance decision. If the case is remanded for reconsideration, the entire procedure begins anew.
Tax authorities have a set time limit to conduct proceedings. However, exceeding this time limit has no consequences. Only the expiry of the statute of limitations results in the tax proceedings being discontinued.
If we are a party to tax proceedings, it's important to ensure the matter is thoroughly investigated and all procedural requirements are met. Violation of legal provisions or procedures by tax authorities may, in the event of an unfavorable decision, result in its reversal by an administrative court. To ensure our rights are properly protected, it's worth seeking the assistance of a professional attorney who will ensure everything is conducted legally and that the tax office doesn't abuse its dominant position.
This article is for informational purposes only and does not constitute legal advice.
Legal status as of April 28, 2025
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