On 11 July 2024, the Higher Administrative Court (Cour administrative) delivered a significant ruling in a case between Mrs. (A) and the Direct Tax Administration (ACD), following a tax audit covering the fiscal years 2010 to 2015.
After rejecting the claim regarding the territorial incompetence of the tax office as inadmissible and providing clarifications on the procedures for dematerialised audits conducted by the administration, the Higher Administrative Court focused on the central issue of the case: whether the tax office respected the principle of adversarial proceedings as provided by § 205(3) of the General Tax Law (Abgabenordnung, AO).
Respect for the principle of adversarial proceedings
Mrs. (A) contested the tax reassessments, arguing that she was not given the opportunity to respond to the findings before the corrective assessments were issued. The Court examined two key documents in this regard: a report (compte-rendu) dated 23 October 2020, and an information letter sent on 2 November 2020.
The report which detailed the alleged accounting irregularities identified during the audit, was not communicated to Mrs. (A) before the reassessments were finalised. The Court ruled that this failure to provide the report violated her right to a fair defence. Furthermore, the information letter did not clearly inform Mrs. (A) of her right to respond before the tax assessments were issued, constituting another breach of § 205(3) AO.
Conclusion
Due to these procedural violations, the Court annulled the tax assessments for the years 2010 to 2015, concluding that the tax office failed to comply with the principle of adversarial proceedings. This ruling highlights the importance of procedural safeguards in tax audit processes, reminding the tax authorities of their obligation to provide taxpayers with a meaningful opportunity to contest reassessments before any final decisions are made.
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