The Federal Court has decided that the assessment notices based on the VAT Law may not have the force of rulings. It has therefore confirmed the judgement of the Federal Administrative Court.
Since the new VAT Law came into force at the beginning of 2010 the FTA has treated assessment notices as rulings. For the taxpayers this has resulted in a significant restriction in practice. They no longer had the opportunity to discuss with the Tax Administration the results of the audit informally before a ruling was established.
The facts underlying the judgement concern a taxpayer, which after expiry of the thirty day period had entered an appeal against an assessment notice of the FTA. The FTA did not allow the appeal on the ground that the deadline had expired. The taxpayer took the subsequent legal dispute up to the Federal Court. The court has now confirmed the Federal Administrative Court’s judgement, which denied the assessment notice the character of a ruling.
Therefore it has been decided in the last court of appeal that the systematic use of assessment notices as rulings is not in conformity with the VAT Law. It is a fact that nowhere doe the law describe the assessment notice as a ruling. The judgement is based on an examination of the various interpretation possibilities. It finds in particular that both in view of the preliminary work and in view of the systematology of the law it can be concluded that the assessment notices are not intended to have systematically a ruling character. The majority of prevailing scholarship also supports this standpoint. In addition the Federal Court explains that it does not seem unusual that for a tax that is subject to the self-assessment principle prior to the assessment the taxpayer has the possibility of an informal discussion with the tax authority.
Concerning the consequences of the judgement the Federal Court stated that it annuls the non-allowance decision in question, but does not make it void. Invalidity would have had the consequence that all existing assessment notices would have become invalid.
If the FTA now implements the judgement, the provision about the legal enforceability again attains key importance. Payment without reservation of an assessment notice results, pursuant to Art. 43 VAT Law, in the legal enforceability of the claim. If in future an assessment notice is paid in order to avoid late payment consequences, a reservation must be entered, if the taxpayer is not fully in agreement with the FTA’s assessment.
It can be expected that the FTA will revise its publications on this matter. It therefore remains to wait and see what further effects the Federal Court’s judgement will have.