Tax administration

The Tax Procedure Code, in force since 1 January 2004, unifies previous legislation regulating tax returns, tax assessments, tax registration, tax audits, collection of budgetary receivables, as well as tax jurisdiction. The main rules and principles of the tax procedure are presented below.

Shareholders, directors, managers and others may be held liable for the tax obligations of the taxpayer under certain circumstances (e.g. anyone causing the insolvency of the debtor by disposing of the debtor’s assets or hiding such assets; anyone acquiring in bad faith the debtor’s assets within three years of the debtor’s insolvency).


 

Specific rules apply to the preparation and serving of acts issued by the tax authorities the taxpayers.

The taxpayer may apply for an advance ruling, which will be mandatory for the tax authorities to the extent that (i) the legal provisions based on which the ruling was issued are not amended / repealed and (ii) the taxpayer complies with the ruling. A similar application may be fi led for an advance pricing agreement setting out the transfer pricing rules applicable between affiliates.

Under the law, advance rulings must be issued within 45 days of the application being submitted, while for advance pricing agreements the term is 12 or 18 months, as the case may be. In practice, however, tax authorities process these applications very slowly.


 

The concept of fiscal domicile is defined, with application to both individuals and legal persons. This concept is essential in defining both the tax jurisdiction and tax registration obligations.


 

Any request by the taxpayer must be processed and answered by the tax authorities within 45 days, unless they require additional documents to be provided, in which case the period is extended by the amount of time necessary for the taxpayer to provide the requested documents.


 

The groups required to perform tax registration are, according to the Code, any persons or entities that are subject to a fi scal legal relationship. Registration with the tax authorities must be made within 30 days of the date the circumstances which gave rise to the obligation occurred.


 

The limitation period within which the tax authorities are entitled to assess additional tax liabilities is five years as of 1 January of the year following that in which the taxable event occurred.


 

Tax inspections can be carried out in respect of all legal persons, irrespective of their organisation form that are bound to determine, withhold and pay taxes, duties, contributions and other amounts owed to the general consolidated budget.

Prior to the beginning of a tax inspection, the tax authorities must notify the taxpayer in writing, save for the cases explicitly laid down in the Tax Procedure Code.

The tax authorities may not inspect the same taxes for a period previously inspected, unless additional data is obtained, of which the tax inspectors were unaware when carrying the first inspection, or computation errors were made.

Tax inspections are generally carried out at the taxpayer's business premises and may not exceed three months. For large taxpayers that have secondary offi ces, the tax inspections may not exceed six months. The tax authorities may suspend the tax inspection if they deem it necessary for the clarifi cation of the taxpayer’s tax status.

Before finalisation of the tax inspection, the tax authorities are bound to inform the taxpayer of their fi ndings and the tax consequences and allow the taxpayer to express its point of view. Upon fi nalisation of the tax inspection, the authorities conclude a tax inspection report, based on which the tax assessment is made. The tax inspection report is communicated to the taxpayer along with the tax assessment.

Detailed rules apply to payment methods, payment deadlines, as well as treatment of partial payments.

The offset between the taxpayer's receivables against the budget and the budgetary receivables prevails over reimbursement. The offset is allowed for certain, liquid, outstanding receivables to or from different budgets, provided that a certain offset order is observed.

The taxpayer’s right to request a reimbursement is subject to a limitation period of five years starting with 1 January of the year following that in which the right to compensation or restituition arose.

For failing to comply with tax obligations to the State Budget in due time, late payment interest and penalties are due.

As of 1 October 2010 the late payment interest rate is 0.04% for each day of delay, This rate may be adjusted by annual budget laws.

Late-payment penalties are established as follows:

1)        if the payment is made within 30 days following the due date, no late-payment penalties apply;

2)      if the payment is made after 30 days but before 90 days from the due date, late-payment penalties are established at 5% of the fiscal liabilities;

3)      if the payment is made after 90 days from the due date, late-payment penalties are established at 15% of the remaining unpaid fiscal liabilities;

4)      the late-payment penalty does not remove the obligation to pay late-payment interest.

Late-payment penalties for local taxes are 2% of the amount past due, calculated for each month or part thereof.

For amounts refundable from local budgets to taxpayers, the later are entitled to receive interest (i.e. 2% per month or part thereof).


 

If the debtor fails to discharge its tax obligations, the tax authorities may proceed to enforcement actions to recover the outstanding receivable, using their own enforcement apparatus.

Any of the following enforcement procedures may be used:

A) enforcement by garnishment;

B) seizure of the taxpayer’s movable assets;

C) seizure of the taxpayer’s immovable assets.

Proceeds of the enforcement procedures are subject to distribution between creditors in accordance with a predetermined order set out in the Tax Procedure Code. Creditors with guarantees (rights “in rem”) over the assets subject to enforcement are preferred to the tax authorities, provided that they registered their rights in the relevant public registrars before the tax authorities registered their receivable.

Any interested parties (including the taxpayer) may challenge an irregular act of enforcement (including the enforcement itself) or the tax executor’s refusal to execute an act of enforcement within 15 days of the date the taxpayer received notice:

(i)                  the execution or enforcement act of communication notice or notice act received, or, in the absence of these, when conducting enforcement or in another manner;

(ii)               refusal of the enforcement body to perform the enforcement act;

(iii)             release or distribution of the amounts challenged.

The tax authorities’ right to request the enforcement of fi scal claims is limited to five years as of 1 January of the year following that in which the right arose.


 

Taxpayers are entitled to challenge before the relevant bodies within the tax authorities either a fiscal administrative act or the tax authorities’ failure to issue such an act.

The Code regulates the form and content of the challenges to be fi led by taxpayers.

The challenge has to be submitted within 30 days of the date of communication of the administrative fiscal act, under the sanction of nullity. If the tax administrative act challenged does not contain certain mandatory elements (for example, deadline for filing the appeal), an appeal may be filed within three months of the date of the tax administrative act.

If the taxpayer is not satisfied with the solution of the tax authorities, it may fi le a claim with the court within six months of the solution to the administrative complaint being delivered to it. The deadline may be extended on serious grounds up to one year from the day the solution was issued.


 

There are several legal means for taxpayers to fi le a court claim aimed at suspending the enforcement of tax liabilities. Depending on the case, the taxpayer may be ordered to provide a cash guarantee of up to 20% of the contested amount.