The Constitutional Court found No 299 / 2015 Coll.
Findings of the Constitutional Court of 15 September 2015 sp. zn.
Valid
The Constitutional Tribunal found
Text versions:
10.11.2015
299
FIND
The Constitutional Court
On behalf of the Republic
On 15 September 2015, the Constitutional Court decided under sp. zn. Pl. ÚS 18 / 14 in plenary composed of the President of the Court of Paul Rychetský (Judge of the Rapporteur) and Judges Louis David, Jaroslav Fenyk, Jan Filip, Vladimir Krórek, Tomáš Lichovník, Jan Musil, Vladimir Sládeček, Radovan Suchánek, Kateřina Šitáková, Vojtěch Šimíček, Milady Tomková, David Uhíř and Jiří Zemánek, on a proposal from the Supreme Administrative Court of the Czech Republic and the Government of the Czech Republic, on the abolition of the first and second sentences of Law No 280 / 2009 Sb, the Tax Code, with the participation of the Parliament of the Czech Republic and the Senate of the Parliament of the Parliament of the Czech Republic, and the Government of the Czech Republic and of the Czech Republic and of Mgr.
as follows:
Motion denied.
Reasons
Subject matter
1. Before the Supreme Administrative Court (hereinafter referred to as the "appellant"), pursuant to sp. zn. 4 Afs 105 / 2014, the appeal procedure of the Appeal Financial Directorate (as the procedural successor to the Finance Directorate for the City of Prague) against the judgment of the Municipal Court in Prague of 24 April 2014 No. 11 Af 15 / 2013-124, No 18268 / 12- 1300- 106629, No 19192 / 12- 1300- 106629 and No 19193 / 12- 1300- 106629, respectively. Those decisions rejected the applicant's appeal against the additional payment periods of the Prague Finance Office of 20 March 2012 No 143558 / 12 / 001513105042, of 19 March 2012 No 143684 / 12 / 001513105042 and of 20 March 2012 No 143722 / 12 / 001513105042, which measured the value added tax for the second quarter of 2007 of CZK 1,064 754, for the third quarter of 2007 of CZK 776 801 and for the fourth quarter of 2007 of CZK 3363 411. These premises were also confirmed.
2. According to the Supreme Administrative Court, the decision on the appeal depends on the question of whether the tax in question was measured by a final decision before the expiry of the prescribed ex ante period. The opening of the tax control with the applicant on 23 November 2009 was an act which, pursuant to Article 47 (2) of Act No. 337 / 1992 Coll., on the Administration of Taxes and Fees, as amended by Act No. 35 / 1993 Coll., suspended the running of the pre-compulsory period for the measurement of value added tax for the tax period of the second, third and fourth quarters of 2007. Thus, the new three-year period started to run from 31 December 2009 and was due to expire at the end of 2012. In the present case, it is common ground that the contested decisions of the Financial Directorate did not become final until 25 January 2013, when the applicant's representative was duly served. Therefore, the early measurement of the tax could only have taken place if, before the end of the pre-compulsory period, a legal event had occurred which resulted in its interruption or extension. Otherwise, the illegality of the decisions to measure the tax would have to be established.
3. While the Municipal Court in Prague found no such fact and annulled the contested decisions by the action, the Supreme Administrative Court assessed the case differently in law. In his view, the delivery of the additional payment orders on 20 March 2012 had to be considered as a notification of the decision on the finalisation of the tax, with which Section 148 (2) (b) of Act No 280 / 2009 Coll., the Tax Code, links the extension of this period by 1 year. According to Article 264 (4) of the First and Second Tax Regulations, the effects of the legal facts which have occurred after its effectiveness and which have an effect on the running of the pre-tax period (including its extension) are assessed according to the tax rules even if the period in question has started under the application of Act No. 337 / 1992 Coll., on the administration of taxes and charges, as amended ("the Tax Administration and Charges Act ').
4. These considerations led the Supreme Administrative Court to the preliminary conclusion that, in view of the extension of the provisional period in question, the value added tax for the period of the second, third and fourth quarters of 2007 was definitively measured in due time in view of the subconstitutional law. However, he could not comply with the appeal (so far). In his view, the transitional provision of Paragraph 264 (4) of the First and Second Tax Regulations, which allowed such an extension in the applicant's case, is contrary to the prohibition of retroactivity as one of the principles of the rule of law within the meaning of Article 1 (1) of the Constitution of the Czech Republic (hereinafter the Constitution). The Supreme Administrative Court therefore, by order of 7 August 2014 No 4 Afs 105 / 2014-38, put an application for its annulment to the Constitutional Court and suspended the appeal proceedings until its decision. On 4 September 2014, the Constitutional Court received its application.
Arguments of the appellant
5. The conclusion on the non-compliance of the contested provision with the constitutional order is justified by the Supreme Administrative Court by the fact that, in a situation where the pre-compulsory period for the determination of tax has begun to run for the effectiveness of the Tax Administration Act, it is necessary to see an exceptional case of constitutionally inadmissible incorrect retroactivity as a result of the notification of the decision on the finalisation of tax pursuant to Paragraph 148 (2) (b) of the Tax Code. This is because the time limit in question defines the existence of a legal relationship between the tax administrator and the tax authority, which should not be affected by the establishment of other rules if they are to result in its extension. Otherwise, there would be uncertainty in this legal relationship which would affect the rights of a tax entity, including those relating to its obligations under other legislation, such as the obligation to retain accounting and other documents.
6. While the appellant admits that the contested provision provided for a solution to the relationship between the old and the new legislation could, despite this negative impact, not see the existence of any significant or urgent reason on which this conclusion could be relied. Nor can this reason be seen as an attempt to avoid interpretation problems in the transition from the old to the new system of assessment of the time limits for determining and paying tax (and the related aspect of legal certainty), nor to eliminate the double legal regime in the assessment of the time limit for determining the tax in relation to acts undertaken from 1 January 2011. Although the rules contained in the tax rules can be described as more precisely formulated, a number of interpretative ambiguities have already been removed by case law as the previous legislation of the Tax Administration Act. Moreover, the situation in which a particular institute is applied to certain legal relations according to the current legislation and to others under the new legislation is in practice a very common phenomenon, most of which is not to be defended. No other reason for which the pre-tax period which was initiated for the application of the Tax Administration and Charges Act would have to be assessed according to the new rules, which the appellant finds impossible to come up with, in relation to the acts taken after the entry into force of the tax rules. The improper retroactivity thus defined should therefore be considered as a non-discriminatory measure.
7. That argument concerns only the contested provision. By contrast, the appellant does not in any way dispute the constitutionality of Paragraph 148 (2) (b) of the Tax Code, the purpose of which is to establish a state of legal certainty as to the existence of a pre-tax period and to allow the proper exercise of tax administration in respect of tax subjects whose rights are not affected by the extension of that period, starting after the tax rules have been effective, by one year. This extension is intended to prevent the creation in the future of situations where the tax administrator of the second degree had the minimum time to carry out the appeal procedure, which was negatively reflected in the quality of his decision-making activities.
Proceedings before the Constitutional Court
8. The Constitutional Court pursuant to Article 69 (1), (2) and (3) of Act No 182 / 1993 Coll., on the Constitutional Court, as amended, (hereinafter referred to as "the Law on the Constitutional Court") sent the proposal to Parliament's chambers as parties to the proceedings, as well as to the Government and the Ombudsman as authorised to intervene as interveners. At the same time, he requested from the Supreme Administrative Court a file under sp. zn. 4 Afs 105 / 2014, with which the above summary of the appeal proceedings corresponds.
9. The Chamber of Deputies and the Senate, both in their observations of 8 October 2014 and 1 October 2014, signed by the Presidents of the individual chambers of Jan Hamakk and Milan Štěm, briefly summarised the course of the legislative process under which the tax rules were discussed and approved.
10. On 9 October 2014, the Constitutional Court received the Government's notification that it was entering the procedure (Government Resolution of 8 October 2014 No 827). He received the same information from the Ombudsman on 22 September 2014. In both cases, this was done within the statutory time limits.
11. According to the Government's observations of 23 October 2014, signed by the Minister for Human Rights, Equal Opportunities and Legislation, Mgr. Jiří Dienstbier, it follows that the definition of the deadline for the determination of the tax pursuant to Section 47 of the Tax Administration and Taxes Act has long resulted in legal uncertainty due to the ambiguity of its interpretation. Without knowledge of the decision-making practice of courts, which has evolved for several years, this provision could in fact not be interpreted and applied. There was therefore a need to address this situation with new legislation which would remedy it as soon as possible and definitively. The contested provision complements the tax rules in the sense that they prevent the continuation of the state of legal uncertainty by applying two regulations for a certain period (which could possibly be close to 10 years). While it is generally the case that maintaining such a duality constitutes a legitimate solution to the relationship between the old and the new legislation, in the present case it is an undesirable solution, taking into account the qualitative improvement of the tax rules, the large number of entities concerned and the possible duration of such a situation and the need in some cases to take certain actions or procedures with an impact on several tax periods which, while maintaining that duality, would lead to inconsistency in the assessment of the effect of each operation. An interest in the economic exercise of public authority may also be mentioned. The transition to new legislation, even in the case of proceedings initiated before 1 January 2011, was intended to constitute a clear model for tax entities in which the new rules are applied uniformly. If the tax rules link the extension of the tax deadline with the reasons with which the tax administration law did not do so, this is of limited importance because the tax entity could not even, under the original legislation, estimate the actual duration of that period.
12. In the view of the Government, those reasons justify the false retroactivity which was set up by the contested provision. These include a strong public interest in the legislative solution chosen, which will contribute to greater clarity or clarity of the legal status of individual tax entities. Moreover, the new tax legislation is not always due to the tax entity, since its extension extends the period in which it is entitled to submit an additional tax return lower or to apply an excessive deduction. Although the Supreme Administrative Court calls into question the constitutionality of the contested provision in terms of legal certainty, the Government believes that, in this respect, it would have a negative impact on the position of tax entities, on the contrary, its abolition by the Constitutional Court. In cases where there has not been a final determination of the tax, or where that determination is the subject of exceptional remedies and supervisory measures, or judicial review where appropriate, certain acts under Paragraph 148 (2) of the Tax Code would be regarded as not affecting the course of that period, which, depending on the circumstances, could result in the possibility of establishing a tax or illegality of the previously unjust determination of the tax. In cases where the tax has already been definitively determined but has not yet been paid, the decisions in question would have ceased to be enforceable. For the first group, the effects of deregulation on public budgets can be estimated in the range of approximately CZK 6 billion; for the second group, such an estimate cannot be made. For all these reasons, the Government does not agree with the proposal to repeal the contested provision.
13. Ombudsman Mgr. Anna Shabat, Ph.D., also opposed the proposal of the Supreme Administrative Court. In its comments of 22 October 2014, it stated that the tax rules give tax entities significantly greater legal certainty with effect from 1 January 2011 only by taxing the facts leading to the extension and interruption of the period, as well as the circumstances in which the period does not run. It therefore considers it questionable to argue that the new tax system has intervened in legal certainty, legitimate expectations and the protection of trust in law with its improper retroactive transitional provisions. On the contrary, this could happen precisely by abolishing the contested provision. In the rest of his observations, he points out that, by complying with the proposal, there would be a need to interpret the application of a pre-compulsory deadline under the Tax and Charges Management Act under "new conditions." In the case of tax obligations for which the deadline for determining the tax for the effectiveness of the Tax and Fees Administration Act had begun, it would probably not be possible to apply Paragraph 55b (2) of that Act, under which the review of the tax decision could be initiated no later than two years after the year in which the decision under review was taken by the legal authority. The tax rules make it possible to review the decision on the running of the tax deadline. As a result, it would be either the non-revisability of certain decisions or, on the contrary, the full opening of the review until the end of the original tax limit period. Paragraph 264 (3) of the Tax Code would not be applicable to that period.
14. Those comments were sent to the Supreme Administrative Court, which responded by a reply dated 18 November 2014. It reiterated that the contested provision provides scope for the application of Section 148 of the Tax Code, as well as for the time limits for measuring or measuring the tax, which started to run for the effectiveness of the previous legislation. However, in this unacceptable way, it interferes with the already running precarious period in which material relations between the public budget and the tax entity are to be definitively settled. On the basis of this, that period can be extended beyond the objectively defined time-frame, which was precisely defined by the original legislation. This extension takes place almost exclusively for the benefit of the State and not also for the tax entity for which it will not be of almost any importance to maintain the possibility of submitting additional tax returns in practice. The use of false retroactivity to address the relationship between old and new legislation in this case was not necessary and was not given any significant or urgent public interest. This also applies to the alleged interest in legal certainty, which would certainly also be acceptable to reach the current deadlines. With regard to the negative consequences of the deregulation, even if its impact on public budgets was not estimated at CZK 6 billion, it cannot be overlooked that this income was achieved at the cost of intervening in the already running precarious period, which clearly testified to the interests of the State at the expense of the rights of tax entities. Finally, the appellant maintained his proposal.
15. In accordance with Article 44 of the Law on the Constitutional Court, the Constitutional Court has ruled in the matter without the oral hearing, since further clarification could not be expected from it.
Text and context of the contested provision
16. As already stated above, the Supreme Administrative Court seeks the annulment of part (first and second sentences) of the transitional provision of Section 264 (4) of the Tax Code, the whole text of which is as follows:
Transitional provisions
...
(4) The running and duration of the measurement period, which has begun under the existing legislation and has not expired by the date of entry into force of this Act, are to be assessed in accordance with the provisions of this Act, which govern the tax period. the time at which this period, determined in accordance with existing legislation, is to begin, shall remain. The effects of the legal facts which affect the course of this period and which occurred before the date of entry into force of this law shall be assessed in accordance with existing legislation. The legal facts of the new construction of the tax period under this Act, which began before the date of entry into force of this Act, only stop the period from the date of entry into force of this Act. '
17. The purpose of the tax period under Section 148 of the Tax Code, as well as the former tax period under Section 47 of the Tax Administration Act, is to define the period during which the tax administrator is entitled to determine a tax liability for the tax entity by its decision. In order for the tax to be established in accordance with the law, that decision (except in the cases provided for in Paragraph 148 (6) and (7) of the Tax Code) must become legal before the expiry of that period. That is the moment when the authorisation in question expires. It is only within that period that other instruments used to change the last tax known may be applied, whether for the benefit or against the benefit of the tax entity, including an additional tax return under Paragraph 141 of the Tax Code. As a result, the relationship between the public budget and the tax entity should be definitively settled.
18. The contested provision provides for the legislation under which, as from 1 January 2011, when the tax rules came into force, the outstanding period for the assessment of the tax, which had begun with the application of the Tax Administration Act, is to be assessed. On the basis of the above, the legal effects foreseen by Paragraph 148 of the Tax Code, including paragraph 2 (b) thereof, which have been taken since that date, should be linked to the course and duration of that period, by 1 year if the tax decision has been notified within the last 12 months before the expiry of the tax period. It is not relevant, however, that such an extension did not allow the Tax and Charges Administration Act.
19. For the sake of completeness, it is appropriate to add that the contested provision constitutes a special provision in relation to the transitional provision of Paragraph 264 (3) of the Tax Code, according to which, in order to assess the course and duration of the period which had begun under the existing legislation, the date of entry into force of this Law, which regulates the period which is closest to it by nature and purpose; that period shall not end before the date on which it would end under existing legislation. It is clear that, in relation to the former tax assessment period, Article 148 of the Tax Code would also be applicable on the basis of that provision and the purpose closest to the tax determination period.
Terms and conditions of the formal assessment of the proposal
20. Before the Constitutional Court was able to proceed to the substantive examination of an application under Article 87 (1) (a) of the Constitution, it had to examine whether all the conditions laid down by the Constitutional Court Law were fulfilled.
21. Paragraph 64 (3) of the Law on the Constitutional Court provides that the application for annulment of the law or its individual provisions is also entitled to be lodged by the court in the context of its decision-making activities pursuant to Article 95 (2) of the Constitution. According to this Article, if the court concludes that the law to be applied in the resolution of the case is contrary to the constitutional order, it shall bring the matter before the Constitutional Court. That condition of the design authorisation is fulfilled if it is a law whose application is to be immediate or unavoidable in the present case [Order of 23 October 2000 sp. zn. ÚS 39 / 2000 (U 39 / 20 CollNU 353)]. It follows from the purpose and purpose of the specific control of constitutionality that "the law to be applied in the resolution of the case 'is only one (or its provision) which obstructs the achievement of the desired (constitutionally conformal) result [e.g. the finding of 6 March 2007 sp. zn.
22. In the case of the present proposal, that condition is met because it is from the assessment of the constitutionality of Section 264 (4) of the first and second sentences of the Tax Code and any consequences arising therefrom for the application of that provision that depends on the decision of the Supreme Administrative Court on a particular case. If the contested provision is still applicable after the decision of the Constitutional Court, the service of additional payment orders to the applicant has led to an extension of 1 year (i.e. until 31 December 2013) in accordance with Paragraph 148 (2) (b) of the Tax Code. The decisions of the appeal which confirmed these payment orders would thus have acquired legal power in the course of the appeal (i.e. in January 2013), which would have meant that the final determination of the tax was in accordance with the law. On the contrary, if the Constitutional Court had established its unconstitutionality and that conclusion would have resulted in its (retroactive) inapplicability, it would have established a ground for declaring unlawful the administrative action against the contested decisions of the financial authorities. In fact, the final measurement of the tax would have taken place after 31 December 2012, i.e. at the time when the State's authorisation had already expired (it had been granted).
23. Those conclusions should be drawn on both sentences of the contested provision. Although the rule expressed in its second sentence would also stand alone, the contested provision is designed in a manner that follows the first sentence and specifies its content. Thus, an intertemporal legal rule determining the relationship between the old and the new legislation in question is defined in the tax rules. If, therefore, the Constitutional Court concludes that this rule of law is contrary to the constitutional order, it would have to cancel both of these sentences. In such a case, however, it would continue to be the case that the effects of legal facts affecting the running of the measurement period that took place before the tax rules were effective are assessed in accordance with existing legislation. The difference would only be that the legal basis of this rule would now consist directly in the prohibition of (genuine) retroactivity, which is normally expressed in principle by the rule of law pursuant to Article 1 (1) of the Constitution (see paragraphs 29 et seq.).
24. As regards the other conditions, the Constitutional Court found neither the reason for the inadmissibility of the application nor the reason for the termination of the procedure. The proposal could therefore have been dealt with meritorically.
Assessment of the competence and constitutional conformity of the legislative process
25. According to Article 68 (2) of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended by Act No. 48 / 2002 Coll., the assessment of the constitutionality of the Act with a constitutional order consists of answering three questions: whether it was adopted and issued within the limits of the Constitution, whether it was adopted in a constitutionally prescribed manner and whether its content is in accordance with constitutional laws.
26. In the case of the contested provision, it is beyond doubt that Parliament was competent to adopt it within the meaning of Article 15 (1) of the Constitution. The Constitutional Court further found, from the observations of its chambers and other publicly available documents relating to the legislative process, that the draft tax rules (House Press No. 685, 5th Election Period, 2006-2010), which included the contested provision, were submitted by the Government to the Chamber of Deputies on 15 December 2008. The Chamber of Deputies approved it at the third reading on 17 June 2009 at its 59th meeting (Resolution 1297), when 112 of the 127 Members present voted for it, 2 voted against and 13 abstained. The Senate discussed and approved the bill (Senate Press No. 132, 7th term, 2008-2010) at its 9th session on 22 July 2009 (Resolution No. 240). For voted 62 of the 71 senators present, against 4, delayed 5. The Law adopted was delivered to the President of the Republic on 4 August 2009 and signed on 11 August 2009. His publication took place in the Collection of Laws on 3 September 2009 in the amount of 87 under No. 280 / 2009 Coll.; it became effective on 1 January 2011. These findings in this proceeding are sufficient to conclude that the law was adopted in a constitutionally prescribed manner [by analogy to the finding of 30 June 2015 sp. zn. Pl. ÚS 24 / 14 (187 / 2015 Coll.), paragraphs 28 and 29].
27. In the light of the above findings, the Constitutional Court took the view that the contested provision was in substance compatible with the constitutional order and found that the application for its annulment was not justified. This conclusion was made for the following reasons.
Generally to prohibit retroactivity
28. In order to assess the constitutionality of the contested provision, the decisive question was whether, from the point of view of the prohibition of retroactivity, it was permissible for the running and the duration of the pending tax period to be assessed in accordance with a law which had become effective only after its launch and which allowed it to be extended beyond the scope of the original legislation.
29. In a democratic rule of law (Article 1 (1) of the Constitution), the addressees of legal standards must have a real opportunity to get to know their content in advance and thus to know the extent of their rights and obligations. Only in this case can they adapt their actions and be responsible for them. A legal standard, which becomes effective only after the facts in respect of which it is to be applied have occurred, cannot have an impact on the conduct; it can only, in retrospect or in the future, admit or deny it legal effects. However, since an individual could not have known the content of such a rule of law in the past, it is fundamentally unacceptable for his originally allowed conduct to be retrofitted with an unlawful act, or to be accompanied by additional legal consequences which are liable to its burden. The priority here must be his legal certainty and trust in the law. Otherwise, no one could ever be certain that he was right to do so, because in this respect he would be exposed to unlimited power from the future legislator.
30. The principles of legal certainty, trust in the law or the protection of acquired rights (or prohibition of interference with acquired rights) do not affect only the changes to the legal standards which are retroactive. The legislature must also otherwise ensure that intervention in existing legal relations does not constitute a denial of the legitimate expectations that have been created by their bodies under previous legislation. This will either exclude or at least limit the possibility of some changes in the future as regards the way they are implemented, including, where appropriate, the need to keep the existing legislation in force for a transitional period so that the addressees of the new legislation can adapt to the rights and obligations arising therefrom.
31. The limits thus expressed by the legislature's powers, which can be derived from those principles, constitute a total prohibition of retroactivity (retroactive legal standards), which is normally expressed in principle in the rule of law pursuant to Article 1 (1) of the Constitution; More precisely, it is one of its defining characteristics [the Constitutional Court of the Czech and Slovak Federal Republic's finding of 10 December 1992 sp. zn. Pl. ÚS 78 / 92 (Found No 15 of the Reports of the Resolution and of the Constitutional Court of the CSFR. Praha: Linde Praha, a. s., 2011, p. 92); further found on 24 May 1994 sp. zn. Pl. ÚS 16 / 93 (N 25 / 1 SbNU 189; 131 / 1994 Coll.)].
32. As is apparent from the settled case law of the Constitutional Court [cf. ÚS 33 / 01 (N 28 / 25 CollNU 215; 145 / 2002 Coll.) and the finding of 19 April 2011 sp. zn. In general, while genuine retroactivity is allowed only exceptionally, in the case of false retroactivity the principle of its admissibility is the principle.
33. The essence of genuine retroactivity is that the rule of law causes legal relations to arise before its effect under conditions which have only been subsequently established, or that there is a change in legal relations created under the old legislation, with effects up to the period before the new law (closer to e.g. Tilsch, E. Civil law. General section. Prague, 1925, p. 75; Walk, A. Basics of the Intertemporal Law with regard to § 5 of the Circuit. Brno, 1928, p. 70; Quiet, L. To the temporal scope of the amendment to the Civil Code. Lawyer No 12, 1984, p. 1104). Its prohibition concerns only cases where such retroactive application would be to the detriment of (to the detriment of) the individual, unless the legal entity concerned, having regard to the content of the previous legal standard, could not be in legitimate confidence in the law (in the stability of the legal order) or even have to count on retroactive regulation. This would be the case, in particular, if the rule of law were to be in direct conflict with the fundamental, generally recognised principles of humanity and morality, or with the immeasurable requirements of a democratic rule of law.
34. With regard to false retroactivity, although the law does not create legal consequences retrospectively in its case, in the past it does, however, legally qualify as a condition for a future legal consequence or modifies legal consequences based on earlier rules (e.g. Tilsch, E. Civil law. General section. Prague, 1925, p. 78; Walk, A. Retroactivity laws. In the dictionary of public law. St. III Brno, 1934, p. 800). Although it can be considered to be fundamentally acceptable in contrast to the true retroactivity, even in its case confidence in law must not be denied where there is legitimate expectation on the part of the addressee of the legal standard that the existing legislation will be maintained. Incorrect retroactivity is in line with the principles of legal certainty and trust in law, if it is appropriate and necessary to achieve the objective pursued by law and in the overall measure of "disappointed 'confidence and the importance and urgency of the reasons for legal change, the limits of the capacity will be maintained (cf. the decision of the Federal Constitutional Court of 7 July 2010 sp. zn. 2 BvL 14 / 02, BVerfGE 127, 1, 25, paragraph 58).
Limits resulting from the prohibition of retroactivity in relation to tax legislation
35. In its present case-law, the Constitutional Court has repeatedly expressed its views on the constitutional limits of Parliament's authorisation to impose taxes and charges (or tax and charge obligations) under Article 11 (5) of the Charter of Fundamental Rights and Freedoms. In this context, it can be briefly stated that, although the tax constitutes an interference with the taxable person's right of ownership, it is imposed in the public interest, namely the acquisition of revenue by the State budget for the purposes of fulfilling the functions of the State [the finding of 21 April 2009 sp. zn. ÚS 29 / 08 (N 89 / 53 SbNU 125; 181 / 2009 Coll.), paragraphs 40 and 41; also the finding of sp. zn. The existence of these revenues is a prerequisite for the functioning of the State, and the tax is undoubtedly a means of achieving such a defined purpose. The question of what is to be taxed and to what extent cannot be answered in an abstract manner; its resolution depends on the political decision under the exclusive competence of Parliament [cf. the finding of 10 July 2014 sp. zn. The constitutional review of the statutory tax legislation adopted by it is therefore essentially limited in terms of ownership to the exclusion of its extreme disproportionality, which is reflected in the "obliteration of the substance of the property '[the finding of 13 August 2002 sp. sp. zl. ÚS 3 / 02 (N 105 / 27 SbNU 177; 405 / 2002 Coll.)] or its liquidation effect [the finding of 18 August 2004 sp. zn. Pl. ÚS 7 / 03 (N 113 / 34 SbNU 165; 512 / 2004 Coll.]. The other aspects of the review are requirements arising from the principle of the rule of law, including the requirement of certainty and predictability of the law, the prohibition of insolence and the prohibition of retroactivity (cf. sp. zn. Nor can the principle of equality be omitted (cf.
36. In the present case, the constitutionality of the tax liability itself created by the applicant in the proceedings before the appellant is not assessed, but the legal arrangements for running and the length of the period during which the right of the tax administrator to impose that obligation by a final decision. The requirement for the legislator to set its time limits is based on the principle of legal certainty, which presupposes that public intervention in the private sphere of an individual is, in principle, always limited over time. The purpose of the relevant time limits is "to encourage the tax administrator to exercise his rights and duties in a timely manner and, in view of the legal certainty of tax entities, to establish a situation in which, after their expiry, their obligations, which, in particular as regards the obligation to prove, are always linked to certain problems after a longer period of time '[finding of 11 January 2007, sp. zn. II. ÚS 493 / 05 (N 5 / 44 SbNU 53)]. The unlimited right of the tax administrator to decide on the determination of the tax would undoubtedly lead to problematic decisions by both the competent administrative authorities and the courts, which would be forced to decide on very old claims, in a situation where there is no longer sufficient evidence to establish the facts. In this respect, it can be held that the presumption" brings stability and certainty to society, allowing debtors to plan their lives knowing that, as a result of the expiry of time, a claim against them can no longer be invoked' (judgment of the Supreme Administrative Court of 19 February 2009 No 1 of the Afs 15 / 2009-105; publicly available at http: / / www.nsjus.cz). Leaving the possibility of establishing a tax irrespective of the time run would open up the scope to call into question the tax administrator's procedure, taking into account the requirements of equality and non-discrimination. It is therefore the legislature's duty to define, by its decision, the running and duration of the tax period in a manner which, in addition to the public interest, takes due account of the legal certainty of tax entities.
37. The prohibition of retroactivity is of different importance in the case of statutory tax adjustment depending on whether the change relates to (a) the actual definition of the tax or its individual components (subject to tax, subject matter, tax base, rate and maturity of tax), or (b) the associated obligation to register and store the material supporting the facts for the calculation of the tax, or (c) the deadline for the determination of the tax.
38. In relation to the tax liability or its related legal relationships, this prohibition is reflected in the sense that its formation or change (if it comes to the burden of the individual concerned) cannot depend solely on the legal facts found before the law which established it has been applied. For example, the legislature cannot provide for an additional income tax for the last year and, in determining it, it is based on the aggregate income that the tax entity had during that period. This entity, at the time of the income in question, could not have anticipated that it would also have to pay that tax. Consequently, it no longer had to have the necessary amount to pay it. This is not to say that the subject of taxation cannot be additionally property which was the income of the tax entity last year. However, the reason for its taxation cannot (only) be the fact that it acquired it within a certain period of time, but that it owns it at the time when the tax became chargeable to it. It is only from this point on that he must assume that part of his current assets will be subject to tax and adapt their actions to that. These conclusions relate only to genuine retroactivity. With regard to possible changes to the tax legislation in the future, tax entities must assume that the legislator may take them on the basis of its political decision. Even here, however, it cannot be ruled out that the new legislation, even if it is retroactive, will interfere with their legal status in a way that completely denies their trust in law. An example can be given of changes to the legal arrangements during the accounting and taxation periods, which would still result in a different assessment of the nature of the tax-relevant facts which the tax entity could not adapt to (point (b) of point 16).
39. In the case of the obligation to register and store the material supporting the facts for the calculation of the tax, the prohibition on retroactivity is reflected in the fact that, after the tax liability has been incurred by the tax entity, it is no longer possible, on the part of the compulsory entity, to further establish more stringent requirements to prove its amount (cf. sp. zn. For example, if the law, at the time when costs were incurred by a tax entity to achieve a certain income, provided that a certain document was required to prove them for the purpose of reducing the tax base, then it would not be possible to lay down, in addition, more stringent formalities for its form which would effectively prevent the later application of those costs in tax proceedings. Although such a change in legislation would only formally constitute an improper retroactivity, it would only apply to a possible procedure that would be conducted after its effectiveness, but would in fact lead to a modification of the own extent of the tax liability that has arisen in the past. Its effect would thus - materially assessed - correspond to the retroactivity of the right, which would result in its constitutional assessment having to conclude that it is contrary to the prohibition of retroactivity.
40. In the end, retroactivity can be considered even in the case of a pre-tax period. A change in its legal regime would give rise to genuine retroactivity if it had, or could have, the effect of "reviving" a period that had elapsed before the new legislation became effective. This is due to the fact that, as a result of this, the creation of an additional State authorisation already expired would be to establish a tax and, in fact, a "revival 'of the corresponding tax liability, which would otherwise no longer be required by the tax entity. On the contrary, false retroactivity will be if a new law takes place or if, on the basis of future legal facts, it can be extended (on the basis of future legal facts), but on the date on which it is effective, the deadline for determining the tax beyond the original legislation. Such a change would in no way affect the content of the existing tax obligation, nor would it in itself cause any other related obligation to arise, but would nevertheless be liable to the tax entity. As a result, the authority of the State to establish the tax would last for a longer period and the tax entity would have to continue to expect its use. Moreover, the continued duration of the related obligation to register and store evidence of facts for the calculation of the tax, as well as any factual need to retain a certain financial reserve in the event of a different assessment of these facts by the tax administrator, could, depending on a particular tax entity (typically for entrepreneurs) and the nature of its activity, lead to a non-negligible cost.
41. The said intervention does not make the said amendment to the legal arrangements for the operation and duration of the period for the determination of the tax inadmissible without further action. As in other cases of false retroactivity, it is crucial for its assessment whether the intervention in legal certainty which would have occurred as a result of the new legislation can be considered acceptable in view of the confidence of the parties concerned in the previous legislation (or the legitimate expectations raised by it). In particular, the rules laid down by law should allow the tax body to predict when the period in question will expire. The tax entity cannot naturally know exactly when it will happen at the time of the tax obligation, since this moment depends on future legal facts that are not or may not be affected (e.g. the initiation of tax control). It may, however, act in confidence that its determination will take place in accordance with those rules and, in this respect, adapt its conduct to its further conduct.
42. The principle of legal certainty prevents the legislature from leaving the possibility of establishing a tax without a time limit or for a period whose (extreme) length, given the possible impact on the legal sphere of tax entities, would lack any reasonable justification. It would also be contrary to it if the legal rules governing the running and duration of the tax period were to be amended in such a short time before the expiry of the tax period that it could not be reasonably expected from the tax entities concerned to adapt their actions to the last minute extension. In such a case, it would be an inadmissible false retroactivity, unless there was a strong public interest on the part of the public authority, justified in particular by exceptional circumstances which outweigh the legitimate interest of tax entities in having their legal relations arising from the relevant tax liability definitively settled. Otherwise, the prohibition of changes to the statutory regulation of the tax deadline, which would affect the course and duration of the period initiated under the original legislation, cannot be generally inferred from the principle of legal certainty.
Compliance of the contested provision with the prohibition of retroactivity
43. The above grounds were decisive for assessing the compliance of the contested provision with the retroactivity ban resulting from Article 1 (1) of the Constitution. In its reasoning, the Constitutional Court also acknowledged the way in which the possible application of Paragraph 148 (2) (b) of the Tax Code is reflected in the legal sphere of the tax entities affected by this provision.
44. First of all, it should be noted that the tax rules, which included both the contested provision and its Paragraph 148 (2) (b) from the outset, were published in the Collection of Laws on 3 September 2009 and became effective on 1 January 2011. At the same time, an extension of the tax assessment period initiated for the effectiveness of the Tax Administration and Charges Act could only be made against those entities that had not been subject to the tax assessment period until 2011. The tax rules shall not apply to cases where this happened not later than 31 December 2010. It is therefore clear that, although the Tax Administration and Charges Act did not allow for an extension of the tax period for the reasons set out in Paragraph 148 (2) of the Tax Code, the tax authorities concerned could have calculated the possibility of applying that provision in relation to the legal facts found to be effective in the tax system in sufficient time (at least 1 year and 4 months) before its expiry under the original law. Therefore, the change in question could not have been surprising to them and could have adapted its further negotiations to it. In view of the limitation of the duration of the tax period, a maximum period of 10 years from the beginning of the tax system pursuant to Article 148 (1) (b) (5) of the same Law) cannot be found to be disproportionate to the legal certainty of the tax operators concerned or, in view of the overall duration of the tax in a particular case, if it would result in a one-off or repeated extension. Article 47 (2) of the Tax and Fees Administration Act has already set a ten-year objective deadline.
45. The appellant questioned both the constitutionality of the contested provision and the absence of a strong enough reason for the legislator to provide a solution to the relationship between the old and the new legislation. In this context, the Constitutional Court notes that the purpose of the contested provision can be seen, on the one hand, in an attempt to harmonise the rules on the operation and duration of the period for the assessment or determination of the tax (thereby ensuring their clarity for the purposes of their further application) and, on the other hand, in cases where the time limit has begun to run under the law on the administration of taxes and charges, on the other hand, it may be extended under Paragraph 148 (2) of the Tax Code. In fact, the latter provision provides time for the tax administrator to be able to take a final decision on the acts listed therein, which, otherwise, might not be possible for the short term of the remaining period. In both cases, these are objectives which can be considered legitimate and cannot be seen as arbitrary on the part of the legislator. This is not to say that the legislator had to deal with the relationship between the two rules in precisely this way. In relation to cases where the period in question had started to run for the effectiveness of the Tax and Charges Administration Act, it could also continue to maintain applicable prior legislation. However, where it has chosen another solution, the decision cannot be linked to an inadmissible interference in the legal certainty of the tax entities concerned. In view of the overall impact of the change in question on their legal status, as well as the possibility of its consequences in good time, it cannot be seen that they have such an intense interest in maintaining the original legislation as would, in their case, exclude the application of the tax rules in relation to the course and duration of the period for assessment and thus make the contested provision unconstitutional.
46. The Constitutional Court concludes that, in this finding, it only addressed the question of compliance of the contested provision with the principle of legal certainty and the prohibition of retroactivity, and not any other interference in the constitutionally guaranteed rights and freedoms of tax entities which could arise as a result of the application of Paragraph 148 (2) (b) of the Tax Code itself. The appellant's proposal did not seek to abolish this provision, and no part of that finding could be interpreted in the sense that its constitutionality would also be considered as a matter of substance.
Conclusion
47. Since the Constitutional Court concluded that the contested provision is not contrary to Article 1 (1) of the Constitution, it decided pursuant to Article 70 (2) of Act No 182 / 1993 Coll., on the Constitutional Court to reject the application for annulment.
President of the Constitutional Court:
JUDr. Rychetský v. r.
Different opinions under Article 14 of Act No. 182 / 1993 Coll., on the Constitutional Court, as amended, were taken by Judge Louis David, Kateřina Šimáková and Vojtěch Šiměl to the decision.
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Regulation Information
| Citation | The Constitutional Court found no. 299 / 2015 Coll., on the application for annulment § 264 paragraph 4 of the first and second sentences of Act No. 280 / 2009 Coll., Tax Code |
|---|---|
| Regulation Type | The Constitutional Tribunal found |
| Author | - |
| Collection | Code of Laws |
| Date of Promulgation | 10.11.2015 |
|---|---|
| Effective from | - |
| Effective until | - |
| Status | Valid |
The regulation text is for informational purposes only.
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