The judgment concerned additional VAT assessment in connection with a fraudulent chain of transactions involving pistachios, where the taxpayer had failed to take sufficient measures to prevent its participation in the chain. The tax proceedings concerned a dispute over compliance with the three-year time limit for determining the tax. The taxpayer insisted that the audit had been initiated by email, in which the tax administrator requested certain documents and announced a subsequent audit. The tax administrator disagreed and argued that the audit had only begun at the moment of its "official" initiation.
The case was referred to the regional court, which ruled in favor of the taxpayer, i.e., that the deadline for determining the tax began with the sending of the email and was therefore exceeded. The tax administrator disagreed with the court's conclusion and appealed to the Supreme Administrative Court. In the case in question, the key issue was whether the email sent by the tax administrator to the taxpayer had the effect of initiating a tax audit. The Regional Court concluded that the tax administrator had sufficient information to intend to audit the company's transactions and that this intention was sufficiently demonstrated in the email sent. However, the Supreme Administrative Court disagreed with the Regional Court's conclusion that the tax administrator's email did not lead to the material initiation of a tax audit. According to the Supreme Administrative Court, this audit in the material sense does not involve any collection of information. If the tax administrator is merely "mapping the terrain" – searching for and obtaining preliminary background information, which it evaluates only in relation to its further proceedings and not in relation to a specific tax liability – it is, according to the Supreme Administrative Court, conducting a search and not a "hidden" tax audit. A distinction between research activities and a "hidden" tax audit can only be made on the basis of an overall assessment of the specific actions taken.
In the case in question, the email in which the tax administrator reminded the taxpayer of the agreed date for a personal meeting to discuss the initiation of a tax audit and at the same time communicated the scope of the required documents could not be considered the material initiation of a tax audit. According to the Supreme Administrative Court, it was also crucial that the tax administrator did not expect a reply to his email and did not invite the taxpayer to communicate by email. On the contrary, it is clear from the email that its purpose was not to initiate an audit directly, but to remind the taxpayer when the audit would begin.
