In 2020, the tax administrator initiated a tax audit with the client to check compliance with the conditions for claiming VAT exemption on the supply of goods from the Czech Republic to another EU Member State (Denmark) pursuant to §64 of Act No. 235/2004 Coll., on value added tax. The tax administrator was going to charge the client VAT in the amount of 18 million CZK. The client, as a medium-sized family-owned manufacturing company, would have been liquidated. Specifically, the tax authority accused the client of not taking reasonable and effective measures to obtain sufficient evidence that it had supplied goods to a customer registered for VAT in another EU Member State, i.e. the client could not have been in good faith that its customer would actually pay VAT on the goods supplied in Denmark (reverse charge mechanism). In doing so, the tax authority referred in particular to the client’s statement that he had not required persons acting on behalf of the customer to provide proof of authorisation to act for the customer and to formal irregularities in the client’s tax documents.
The client turned to SAMAK only at the stage after the initial interviews, when he concluded that the current tax advisor did not have enough experience in handling complicated tax disputes. After taking over the legal representation in the tax proceedings, we first assembled a project team of tax consultants and litigation attorneys who analyzed the client’s procedural and evidentiary situation and proposed a strategy for the conduct of the tax litigation and the structure of “defensive ramparts”, i.e. arguments and evidence that each on its own was capable of achieving the client’s acquittal from the tax authorities’ suspicion. As a result of the well chosen strategy, after several rounds of evidence, including through international legal assistance, the tax authority gradually reduced its demands for tax assessment until finally, in 2023, it completely resigned from its demands in the appeal proceedings and exonerated the client from all suspicions of non-taxation.
In this case, the effectiveness of our tax litigation method, which is based on the following principles, was once again confirmed:
- Enter into proceedings with a qualified team of tax advisors and litigation attorneys early in the tax litigation process, as clients without adequate representation make the most mistakes in the early stages of litigation,
- Evaluating the client’s procedural and evidentiary situation and determining an effective strategy for managing the tax dispute, continuously adapting the strategy to the different phases of the tax dispute, as proceedings before the tax administrator, the Tax Appeal Directorate and the Administrative
- Court require different procedural procedures and arguments, consistent use of all evidence and arguments in favour of the client, which in tax disputes requires combining knowledge of tax and accounting issues with knowledge of procedural rules and court case law in tax matters.
Partner Marek Svehlik says: “We are pleased that the client survived the threat from the tax authorities and that he can continue his successful business.”
Enter into proceedings with a qualified team of tax advisors and litigation attorneys early in the tax litigation process, as clients without adequate representation make the most mistakes in the early stages of litigation,
Evaluating the client’s procedural and evidentiary situation and determining an effective strategy for managing the tax dispute,
continuously adapting the strategy to the different phases of the tax dispute, as proceedings before the tax administrator, the Tax Appeal Directorate and the Administrative Court require different procedural procedures and arguments,
consistent use of all evidence and arguments in favour of the client, which in tax disputes requires combining knowledge of tax and accounting issues with knowledge of procedural rules and court case law in tax matters.
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