What happens to tax penalties when, by a final court decision on the merits, cancellation of the enforcement injunction intervenes?
A new Tax Procedure Code has come into effect in 2016 together with the new Tax Code. One of the most relevant amendments brought by the new tax procedure norms clarifies a situation which, until present, was settled only by means of case law.
The provisions under the new tax procedure deal with penalties which are triggered when a tax payer, who initially benefited from a court injunction/order finds itself in the position to pay, in addition to its debt (principal tax obligations), certain interest- and, if the case may be, penalties at a later date.
Provided that the administrative appeal procedure with the superior tax authority was fulfilled, in order to have any enforcement proceedings closed down, the tax payer must first address a request to court to be granted an injunction in this respect, grounded on the applicable contentious law (i.e. Romanian Law no. 554/2004 on administrative procedure), and either afterwards, or at the same time with this request, it has to also refer to court with respect to the annulment of the notice of assessment.
The problem in this case, as stated above, occurs when the injunction of the enforcement procedure is granted, but only for a limited period of time, which expires when the court vested with the settlement on the merits renders its final decision.
According with the tax procedure provisions, as soon as an injunction regarding tax enforcement is granted, all effects of the administrative act are suspended until such injunction ceases and, furthermore, the tax duties are not registered in the tax ascertaining certificate of the tax payer. Consequently, any actions or deeds undertaken by the tax authority in order to recover the amount of money to be imposed on the tax payer are legally suspended. Hence, until a final decision on the merits is issued, the notice of assessment by which the payment of main and ancillary obligations was imposed on the tax payer should not trigger any supplementary penalties, such as delay penalties.
It is important to note here that the delay penalties are not governed by the same legal regime as the interest when it comes to suspension of all effects of a notice of assessment by means of a court decision. Therefore, one must not be held liable to pay an amount exceeding its initial tax debt (principal debt together with interest computed thereto), substantiated in delay penalties. Consequently, when the final decision on the merits is issued and the injunction enforcement procedure is annulled, the tax payer will have to pay its tax debts only within the limits initially established by the notice of assessment.