SLS liability for incorrect RET confirmed
Let’s start from the end. On 30 April, the Senate came to a full stop, or at least a serious exclamation mark in a complicated saga involving real estate tax on expensive and quite old engineering structures. Of course, some finishing touches are still expected – the Senate opinion requires approval from the regional court.
The case is related to incorrect calculation of cadastral values for infrastructure objects. Together with the real estate team, our tax team conjured our way through the formulas for cadastral value calculation applied for the client’s objects, which were complicated even for us, and we detected that the client had a well-founded suspicion that the cadastral value is three times more than the value allowed in law. As a result, tax was also three times higher. The client managed to obtain correct cadastral values for further tax payments. However, a dispute occurred with regard to repayment of overpaid tax for the previous three years and late payment (interest for the time when the municipality kept the money). The liability was footballed among the company, SLS, and the municipality – as to who is responsible for keeping track of changes to laws (changes to the depreciation calculation for engineering structures).
The municipality and the SLS tried to impose this liability on the company because, as the law states, when data characterising the cadastral object are changed, the legal owner of the object must contact the SLS to update the cadastral data. The Senate decided that the changes to the depreciation percentage do not necessary relate to actual changes to the object or changes to the legal status of the object; therefore, the company need not initiate changes to the cadastre. There are legal differences between the calculated depreciation percentage and the assumed depreciation percentage set by the legislator.
As regards responsibility to update the cadastral data in case of such changes, the Senate found that although a gap was detected in the law, this would not fully justify the company’s opinion that amendments to the assumed depreciation percentage specified by law meant that the SLS must itself register changes in the cadastral information system and readjust the object’s cadastral value respectively. If the regional court later establishes that the cadastral value has been calculated incorrectly (and it has been confirmed previously), this will serve as grounds to revoke the challenged municipality decision and to impose an obligation on the SLS to readjust the previously registered cadastral value which was used for calculation of real estate tax during the period in dispute.
SRS loses case on VAT & intermediaries
21.04.2020. The Senate found that the regional court had issued a non-substantiated judgment in yet another case where the SRS had attacked a transaction intermediary. This time, the SRS did not like the fact that an intermediary was involved in order to circumvent territorial sales limitations agreed by car dealers. Therefore, the SRS imposed a fine, by denying entitlement to the input tax in the intermediary’s transactions with the dealer.
The Senate decided that the SRS had failed to prove any tax advantage from involvement by the intermediary in the chain of transactions; therefore, the fine imposed by the SRS was not substantiated. The Senate highlighted that the prohibition on deducting input tax could not serve as a means to ensure that VAT payers comply with their private law liabilities or as a penalty for violation of private law liabilities. The Senate is probably slightly tired of SRS cases against intermediaries; therefore, it has once again emphasised that intermediary business is a normal type of business and should not be penalised as such. It is sad to reflect that the regional court is drawn to such an opinion by the SRS.