Nejvyšší správní soud k prekluzi u příjemců investičních pobídek

Supreme Administrative Court on the Statute of Limitations for Recipients of Investment Incentives

The Supreme Administrative Court recently addressed the issue of the statute of limitations for tax assessment for recipients of investment incentives.

A company received a promise of an investment incentive in 2006. It utilized the entire tax credit in the period 2008/2009 when the general conditions were met. In 2007, the Income Tax Act was amended, reducing the ten-year period for claiming the tax credit to five years.

The company argued that the period for claiming the tax credit should have been five years. In such a case, the statute of limitations for the tax assessment for the tax period under tax audit and subsequent court proceedings would have expired. The Supreme Administrative Court (NSS) sided with the opinion of the Appellate Financial Directorate (and the regional court) that the law in effect at the time of the decision on the promise of the investment incentive must be applied. Therefore, the company was entitled to claim the tax credit within a ten-year period. This conclusion is not affected by the fact that the company utilized the tax credit in the first tax period.

The statute of limitations for tax assessment is governed by a special provision in the Income Tax Act, specifically § 38r, which applies to investment incentives provided in the form of a tax credit. The NSS emphasized that the statute of limitations for the tax period in which the entitlement to the tax credit arose ends simultaneously with the statute of limitations for all tax periods for which the tax credit can be claimed.

Let us briefly consider the historical development of the determination of deadlines for additional tax assessment: in its previous decisions, the Supreme Administrative Court ruled that in the case of tax losses, the tax liability can be assessed within a period of ten years at the latest; later, it applied this conclusion to recipients of investment incentives, stating that it saw no reason why the same principle should not be applied in relation to the amendment of § 38r(1) of the Income Tax Act. Since the subject of the dispute was the 2011/2012 financial year, the Supreme Administrative Court's decision does not contradict these previous conclusions. On the other hand, the Supreme Administrative Court states in the justification of the decision that for the 2008/2009 financial year (the first period of drawing the incentive), the deadline for additional tax assessment did not end until 1 October 2021, i.e. after the expiry of the 10-year period in question. We will probably have to wait until the Supreme Administrative Court's next decision on this topic to find out whether this is a change in approach or just an omission.

For completeness, we note that in 2015, a provision was added to the Income Tax Act allowing taxpayers to notify the tax authority that they will no longer claim the tax credit. This step can make sense in situations where the taxpayer has exhausted the tax credit before the (ten-year) period for claiming the tax credit has expired. By submitting a notification under this provision, the recipient of the investment incentive can achieve a shortening of the statute of limitations for tax assessment under § 38r of the Income Tax Act.

For any questions, please contact the authors of the article or the EY tax team with whom you collaborate.

Authors:

Martin Hladký

Veronika Kruttová